First-time applications for U.S. unemployment benefits rose last week to their highest level since August, coinciding with the spring recess in New York City public schools. According to Labor Department data released Thursday, initial claims increased by 22,000 to 231,000 for the week ending May 4, exceeding the Bloomberg survey forecast of 212,000. The largest gains were recorded in New York, California, and Indiana.
New York public school employees, such as bus drivers, are eligible to apply for benefits during breaks, contributing to the state's large jump in claims. Initial claims before seasonal adjustments rose by nearly 20,000 to 209,324, with over half the increase attributed to New York. California and Illinois also experienced notable gains.
Market Overview:
-US initial jobless claims unexpectedly surge to 231,000, the highest since August 2023.
Key Points:
-The increase coincides with spring break for New York City public schools, where workers can claim unemployment benefits during breaks.
-Underlying trend suggests a stable labor market with claims hovering around 200,000-222,000 for the past quarter.
-Despite the headline jump, economists anticipate a decline in adjusted claims next week.
Looking Ahead:
-While the labor market remains strong, the latest jobs report hints at a slowdown in hiring.
-Federal Reserve closely monitors labor data to guide interest rate decisions.
-The four-week moving average of claims ticks up, but remains below pre-pandemic levels.
Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets (SAN), noted, "While the rise in the headline figure was larger than expected, a weekly increase was very predictable, as this is the usual pop that we routinely see in the wake of New York City school vacations." He expects a noticeable drop in the upcoming week, though perhaps not a full reversal to 210,000.
Despite the latest rise in jobless claims, the U.S. labor market remains resilient. However, the Federal Reserve is closely monitoring labor demand and wage growth. The four-week moving average increased to 215,000, its highest since February. Continuing claims, which track those receiving unemployment benefits, rose to 1.79 million in the week ending April 27.
