US jobless claims rise to highest since October 2021 in sign labor market is cooling

Applications for U.S. unemployment benefits rose to the highest level since October 2021, adding to evidence that the labor market is gradually cooling.

Initial unemployment claims increased by 22,000 to 264,000 in the week ended May 6, Labor Department data showed Thursday. The reading was higher than all estimates in a Bloomberg survey of economists.

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Continuing claims, which include people who have received unemployment benefits for a week or more and are a good indicator of how hard it is for people to find work after losing their jobs, rose by 12,000 to 1.81 million in the week ended April 29.

Applications for unemployment benefits have been trending higher in recent months as some pockets of the labor market have deteriorated. Layoffs that began in white-collar sectors including technology and banking are increasingly starting to impact companies across the economy.

Looking ahead, more job cuts could be on the horizon as a year's worth of interest-rate increases by the Federal Reserve and tighter credit conditions continue to weigh on the economy.

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"The recent surge in jobless claims is consistent with our analysis of WARN notices, which since early this year have suggested imminent softening in the labor market," says economist Eliza Winger. "This will be reflected in the coming weeks, when we see clearer signs of labor-market easing in the monthly jobs report."

On an unadjusted basis, claims rose by about 14,000 to 234,084. Massachusetts saw the biggest jump, while California and Missouri also posted large increases.

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