US weekly jobless claims hit highest level since August of 2023, though job market is still hot

A hiring sign is displayed at a restaurant in Glenview, Ill., Thursday, May 2, 2024. On Thursday, May 9, 2024, the Labor Department reports on the number of people who applied for unemployment benefits last week. (AP Photo/Nam Y. Huh)

The number of Americans applying for unemployment benefits jumped to its highest level in more than eight months last week, another indication that the red hot U.S. labor market may be softening.

Unemployment claims for the week ending May 4 rose by 22,000 to 231,000, up from 209,000 the week before, the Labor Department reported Thursday. Though last week’s claims were the most since the final week of August 2023, it’s still a relatively low number of layoffs and not cause for concern.

The four-week average of claims, which softens some of the weekly volatility, rose by 4,750 to 215,000.

Weekly unemployment claims are considered a proxy for the number of U.S. layoffs in a given week and a sign of where the job market is headed. They have remained at historically low levels since the pandemic purge of millions of jobs in the spring of 2020.

Last month, U.S. employers added just 175,000 jobs, the fewest in six months and another sign that the labor market may be loosening. The unemployment rate inched back up to 3.9% from 3.8% and has now remained below 4% for 27 straight months, the longest such streak since the 1960s.

The government also recently reported 8.5 million job openings in March, the lowest number of vacancies in three years.

Moderation in the pace of hiring, along with a slowdown in wage growth could give the Fed the data its been seeking in order to finally issue a cut to interest rates.

The Federal Reserve raised its benchmark borrowing rate 11 times beginning in March of 2022 in a bid to stifle the four-decade high inflation that took hold after the economy rebounded from the COVID-19 recession of 2020. The Fed’s intention was to loosen the labor market and cool wage growth, which can fuel inflation.

Many economists thought there was a chance the rapid rate hikes could cause a recession, but jobs have remained plentiful and the economy forged on thanks to strong spending by U.S. consumers.

Though layoffs remain at low levels, companies have been announcing more job cuts recently, mostly across technology and media. Google parent company Alphabet, Apple and eBay have all recently announced layoffs.

Outside of tech and media, Peloton, Stellantis, Nike and Tesla have recently announced job cuts.

In total, 1.79 million Americans were collecting jobless benefits during the week that ended April 27. That’s up 17,000 from the previous week.