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Unemployment claims unexpectedly rose to the highest level since January last week

The number of Americans filing unemployment benefits surged unexpectedly last week, reaching its highest level since mid-January, a sign that the boiling labor market may be starting to cool.

Figures released Thursday by the Labor Department show claims for the week ended June 4 rose to 229,000 from an upward-revised 202,000 a week earlier, missing the 210,000 forecast by Refinitiv analysts. This is the largest one-week increase since last July. The four-week average of new claims, which dampens the volatility of weekly numbers, also rose slightly to 215,000 last week.

HOW THE FEDERAL RESERVE MISSED THE QUARTER OF INCREASED INFLATION

Continuing claims, or the number of Americans who consecutively receive unemployment assistance, held steady at 1.3 million — the lowest point since December 1969. By comparison, just over a year ago, more than 15.38 million Americans received benefits.

“The labor market is cooling down a bit after being extremely hot at the start of 2022,” said Bill Adams, chief economist at Comerica Bank. “Initial jobless claims are still extremely low, but they are up 63,000 from their March level, which was the lowest in more than half a century. also pulled back somewhat, another sign that the labor market is getting less red hot.”

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Bay Shore, NY: A large ‘Now Hiring’ advertisement displayed on the windows of the Advance Auto Parts store in Bay Shore, New York on March 24, 2022. ((Photo by Steve Pfost/Newsday RM via Getty Images)/Getty Images)

Claims have hovered around historic lows as the economy continues to recover and Americans increase their spending levels. Unprecedented levels of government spending and a rapid deployment of vaccines have helped revive the US economy, which grew 5.7% in 2021. But it has also contributed to the worst inflation spike in a decade, which has quickly eroded the wages and purchasing power of Americans.

However, businesses have struggled to keep up with demand and have reported difficulty onboarding new employees.

The rise in jobless claims comes a week after a separate Labor Department report showed employers added 390,000 jobs in May, much better than expected.

The labor market remained largely a bright spot in the economy amid growing fears of a shallow recession.

A growing number of Wall Street firms, including Bank of America, Deutsche Bank and Wells Fargo, are forecasting the possibility of a slowdown over the next two years as the Federal Reserve moves to aggressively tighten monetary policy to to calm consumer demand and inflation towards its 2% target.

Inflation from Fed Chairman Jerome Powell

In this Jan. 29, 2020, file photo, Federal Reserve Chairman Jerome Powell pauses during a news conference in Washington. (AP Photo/Manuel Balce Ceneta, File/AP Newsroom)

The Fed has already voted to raise the short-term interest rate by 50 basis points in May and has signaled that hikes of a similar size are on the table in upcoming meetings as inflation remains near a high of 40 years. Rising interest rates tend to create higher rates on consumer and business loans, which slows the economy by forcing employers to cut spending.

Fed Chairman Jerome Powell echoed that sentiment in recent public forums and promised the Fed would hike rates as high as needed to cool prices, sparking concerns of a central bank-induced recession.

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“What we need to see is that inflation is coming down in a clear and convincing way and we’re going to keep pushing until we see that,” he said at an event last month. live from the Wall Street Journal. “If that means going beyond widely understood levels of neutrality, we won’t hesitate at all to do so.”

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