Topline
Jobless claims rose far more than expected last week, according to government data released Thursday morning, bringing an unwelcome development for workers but exhibiting the signs of a weaker labor market that some investors crave.
Key Facts
Some 231,000 new Americans filed for unemployment benefits between Apr. 27 and May 4, well above consensus economist forecasts of 214,000.
It’s the most weekly initial jobless claims in almost nine months, adjusting for seasonality, rising considerably from the prior week’s 208,000.
The last time there were over 230,000 weekly claims was the week ending Aug. 26, 2023, when 234,000 Americans filed for unemployment.
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Key Background
A weakening labor market would help bolster the Federal Reserve’s case to bring down interest rates, which would theoretically boost the economy as lower borrowing costs would encourage businesses and consumers alike to take out loans. The Fed operates on a dual mandate to maximize employment and minimize inflation, having raised rates in the first place to cool inflation. News of the larger-than-anticipated, freshly unemployed crowd comes days after the Labor Department revealed job growth was far weaker than expected in April, with that report jolting markets considerably, sending the S&P 500 to its best day in more than two months. Thursday’s reaction was more muted, though bond yields did slide slightly and the implied odds of two or more increased by a few percentage points, but the prospect of rate cuts has lifted stocks and bonds over the last year. Thursday’s report did not include details on the job functions of new unemployment applicants, but technology has been the hardest-hit sector with nearly 50,000 announced layoffs through the first four months of 2024, according to private firm Challenger, Gray & Christmas.
