US job market shows signs of cooling

WASHINGTON — Fewer Americans enrolled for unemployment benefits for the first time last week, Labor Department data showed on Thursday, though the number of people on benefits rolls overall climbed a week earlier to the highest since January, a sign that the U.S. job market continues to cool.

Initial claims for state unemployment benefits declined 5,000 to a seasonally adjusted 238,000 for the week ended June 15, the Labor Department said. That reversed 5,000 of the surge in the prior week, which had pushed up claims to a 10-month high.

Economists polled by Reuters had forecast 235,000 claims in the latest week.

Labor market momentum is ebbing in tandem with the overall economy following 525 basis points worth of interest rate hikes from the Fed since 2022 to tame inflation. Loosening labor market conditions have led to inflation pressures subsiding and have financial markets anticipating one or more rate cuts this year despite Fed policymakers’ more hawkish outlook.

The U.S. central bank has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range since last July, and at their meeting last week officials revised down the number of rate cuts they anticipate delivering this year to just one quarter-point reduction from a projection of three as recently as March.

The claims data covered the period during which the government surveyed employers for the nonfarm payrolls component of June’s employment report.

Though job growth accelerated in May, that likely overstates the health of the labor market. The unemployment rate rose to 4.0% in May for the first time since January 2022 amid signs that laid off workers could be having a harder time finding new jobs.

Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, could offer more clues on the state of the labor market in June. The so-called continuing claims edged up to a seasonally adjusted 1.828 million during the week ending June 8, the highest since early January.

“Initial claims suggest that the gain in nonfarm employment in May won’t be duplicated in June,” Ryan Sweet, chief U.S. economist for Oxford Economics, wrote following the latest jobless claims data. “The risks to the labor market should be garnering attention by the Federal Reserve.”

Contributing: Lindsay Dunsmuir and Dan Burns