Initial claims for Americans applying for first-time unemployment insurance edged modestly lower to 228,000 for the week ended May 4, coming in above expectations for 220,000. Claims for the prior week were left unchanged at 230,000. The four-week moving average of jobless claims also rose to 220,250, its third consecutive increase.
Despite the uptick, claims remain well below 300,000 – a key threshold generally associated with a healthy labor market.
On the surface, the recent surge in claims after three consecutive weeks around the 200,000 threshold might be concerning, particularly against the backdrop of the slowdown underway in the economy. Still, the fact that claims have held tight around 230,000 for three consecutive weeks and are not continuing to rise provides some reassurance that the pace of layoffs isn’t accelerating.
Moreover, the recent increase in claims returned to a range that persisted for much of the past six months, the exceptionally low layoffs for a few weeks in March notwithstanding.
Although difficult to quantify, the recent volatility in claims data also coincided with the Easter and Passover holidays as well as school spring breaks, all of which can skew the data. With those all in the rear-view mirror, a return of claims to the prior trend range shouldn’t be viewed as unusual.
Job market strength has been the backbone of the economy for several years now, and the April jobs report again proved that. Job creation was exceptionally strong and well above expectations, as the economy added over 260,000 new jobs and the unemployment rate fell to 3.6%. The continued strength in labor market conditions, coupled with a much stronger than expected Q1 GDP result, has tempered concerns about the degree of the slowdown.
Clearly, layoffs have risen meaningfully in recent weeks, and the claims data should be watched carefully for any further signs of deterioration. However, a return to trend after a few weeks of exceptionally low layoffs isn’t a concern. For now, the big picture story for the labor markets remains largely positive.
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