WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits rose last week to the highest level in more than eight months, further evidence that the labor market was cooling.
The weekly jobless claims report from the Labor Department on Thursday, the most timely data on the economy's health, followed news last week that the economy added the fewest jobs in six months in April, while job openings dropped to a three-year low in March.
Ebbing labor market momentum has put two interest rate cuts from the Federal Reserve this year back on the table.
"The labor market shows some signs of rebalancing with fewer job openings posted around the country, and now company layoffs are picking up, hinting at caution on the part of companies as they weigh the outlook for the second half of the year," said Christopher Rupkey, chief economist at FWDBONDS.
Initial claims for state unemployment benefits increased by 22,000 to a seasonally adjusted 231,000 for the week ended May 4, the highest level since the end of last August. Economists polled by Reuters had forecast 215,000 claims in the latest week. Claims broke above the 194,000-225,000 range, which had prevailed since the start of the year.
Some of the rise last week was likely related to seasonal issues following the recently ended school spring breaks.
Unadjusted claims shot up 19,690 to 209,324 last week, with filings in New York surging by 10,248. There were also sizeable increases in applications in California, Illinois, Indiana and Texas. Only Iowa reported a drop in claims over 1,000.
The labor market is steadily rebalancing in the wake of 525 basis points worth of interest rate hikes from the U.S. central bank since March 2022 to dampen demand in the overall economy. Financial markets expect the Fed to start its easing cycle in September.
The Fed last week left its benchmark overnight interest rate unchanged in the current 5.25%-5.50% range, where it has been since July.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 17,000 to a seasonally adjusted 1.785 million during the week ending April 27, the claims report showed.
"For now, the level of layoffs is not signaling a sharp deterioration in labor market conditions," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.