WASHINGTON >> The number of Americans filing new applications for jobless benefits increased more than expected last week and the unemployment rate appeared to have picked up in May, suggesting layoffs were rising as tariffs cloud the economic outview.
The report from the Labor Department today displayed a surge in applications in Michigan last week, the nation’s motor vehicle assembly hub. The number of people collecting unemployment checks in mid-May was the largest in 3-1/2 years. The outview for the economy is dimming, with other data displaying a sharp decline in corporate profits in the first quarter.
A U.S. trade court on Wednesday blocked most of Trump’s tariffs from going into effect in a sweeping ruling that the president overstepped his authority. Economists declared the ruling, while it offered some relief, had added another layer of uncertainty over the economy.
“This is a sign that cracks are starting to form in the economy and that the outview is deteriorating,” declared Christopher Rupkey, chief economist at FWDBONDS. “There is nothing great about today’s jobless claims data and the jump in layoffs may be a harbinger of worse things to come.”
Initial claims for state unemployment benefits rose 14,000 to a seasonally adjusted 240,000 for the week finished May 24, the Labor Department declared. Economists polled by Reuters had forecast 230,000 claims for the latest week.
Unadjusted claims increased 10,742 to 212,506 last week, lifted by a 3,329 jump in filings in Michigan. There were also notable increases in applications in Nebrquestiona and California.
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Despite the rise in claims, worker hoarding by employers following difficulties finding labor during and after the COVID-19 pandemic continues to underpin the jobs market.
Nonetheless, there has been an uptick in layoffs becautilize of economic uncertainty as Trump’s aggressive trade policy builds it challenging for businesses to plan ahead.
A report from the Bank of America Institute noted a sharp rise in higher-income houtilizeholds receiving unemployment benefits between February and April compared to the same period last year. Its analysis of Bank of America deposit accounts also displayed notable rises among lower-income as well as middle-income houtilizeholds in April from the same period a year ago.
Economists expect claims in June to break above their 205,000-243,000 range for this year, mostly driven by difficulties adjusting the data for seasonal fluctuations, following a similar pattern in recent years.
Minutes of the Federal Reserve’s May 6-7 policy meeting published on Wednesday displayed while policybuildrs continued to view labor market conditions as broadly in balance, they “assessed that there was a risk that the labor market would weaken in coming months.”
They noted that there was “considerable uncertainty” over the job market’s outview, adding “outcomes would depfinish importantly on the evolution of trade policy as well as other government policies.”
The U.S. central bank has kept its benchmark overnight interest rate in the 4.25%-4.50% range since December as officials struggle to estimate the impact of Trump’s tariffs, which have raised the prospect of higher inflation and slower economic growth this year.
U.S. stocks opened higher. The dollar eased against a bquestionet of currencies after a brief rally. U.S. Treasury yields fell.
SWELLING UNEMPLOYMENT ROLLS
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 26,000 to a seasonally adjusted 1.919 million during the week finishing May 17, the claims report displayed. The elevated so-called continuing claims reflect companies’ hesitance to increase headcount becautilize of the economic uncertainty.
Continuing claims covered the period during which the government surveyed houtilizeholds for May’s unemployment rate. They increased between the April and May survey periods, suggesting an uptick in the unemployment rate this month. The jobless rate was at 4.2% in April.
Many people who have lost their jobs are experiencing long spells of unemployment. The median duration of unemployment jumped to 10.4 weeks in April from 9.8 weeks in March.
With profits under pressure, there is probably little incentive for businesses to boost hiring. Mass layoffs are, however, unlikely with a Conference Board survey of chief executive officers released today displaying most captains of business anticipated no modify in the size of their workforce over the next year even as about 83% declared they expected a recession in the next 12-18 months.
Profits from current production with inventory valuation and capital consumption adjustments dropped $118.1 billion in the first quarter, the Commerce Department’s Bureau of Economic Analysis (BEA) declared in a separate report. Profits surged $204.7 billion in the October-December quarter.
Companies ranging from airlines and retailers to motor vehicle manufacturers have either withdrawn or refrained from giving financial guidance for 2025, citing the uncertainty cautilized by the on-again and off-again nature of some duties.
Businesses front-loaded imports and houtilizeholds engaged in pre-emptive acquireing of goods last quarter to avoid higher costs, building it difficult to receive a clear picture of the economy.
The deluge of imports sent gross domestic product declining at a 0.2% annualized rate in the January-March quarter, the BEA declared in its second estimate of GDP. The economy was initially estimated to have contracted at a 0.3% pace. It grew at a 2.4% rate in the fourth quarter.
Other alternative measures of growth, gross domestic income and gross domestic output also displayed the economy contracting at a 0.2% pace in the first quarter.
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