Key Takeaways:
U.S. jobless claims rose more than expected to 229,000 last week, though the Labor Department described the labor market as healthy, with May payrolls showing the strongest three-month hiring stretch in more than two years.
"The labor market remains healthy," the Labor Department said in its weekly report Thursday, noting that initial claims, while above the 220,000 consensus from economists surveyed by the Wall Street Journal, remain in a range consistent with stable employment. The 229,000 figure compares with 225,000 a week earlier and marks the highest reading since early February.
Continuing claims, which track the total unemployed population, rose to 1.8 million in the week through May 30, up from a revised 1.77 million the prior week. The modest increase suggests employers are holding onto workers even as hiring slows from the breakneck pace of 2024.
The claims data followed the May employment report showing the U.S. economy added 172,000 jobs, pushing the three-month average to its strongest level since early 2024. The combination of steady payroll gains and only a gradual uptick in layoffs points to a labor market that is normalizing rather than deteriorating.
The 229,000 reading comes as the Federal Reserve monitors labor conditions for signs of softening that could justify rate cuts. The central bank has held its benchmark rate at 5.25 percent to 5.5 percent since July 2023, and policymakers have signaled they need to see sustained evidence that inflation is returning to the 2 percent target before easing. The last time initial claims consistently exceeded 250,000 was in late 2023, when the Fed was still raising rates, and the S&P 500 fell 6 percent over the subsequent two months as recession fears mounted.
With the labor market showing resilience despite elevated borrowing costs and the economic drag from the Iran conflict, the data reinforces the case for the Fed to maintain its wait-and-see posture. Markets are pricing a 45 percent probability of a rate cut at the September meeting, according to CME FedWatch data, down from 60 percent a month ago.
This article is for informational purposes only and does not constitute investment advice.
