WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits rose moderately last week and the prior week’s data was revised sharply lower, suggesting persistent labor market strength.
Initial claims for state unemployment benefits increased 4,000 to a seasonally adjusted 229,000 for the week ended May 20, the Labor Department said on Thursday. Data for the prior week was revised to show 17,000 fewer applications received than previously reported. Economists polled by Reuters had forecast 245,000 claims for the latest week.
Though claims surged recently, boosted by fraudulent applications in Massachusetts, they remain at levels consistent with a still-tight labor market.
The low claims align with recent data on retail sales, factory production and business activity that have suggested the economy regained speed at the start of the second quarter.
The labor market has been resilient, despite 500 basis points worth of interest rate increases from the Federal Reserve since March 2022, when the U.S. central bank embarked on its fastest monetary policy tightening campaign since the 1980s to tame inflation.
There were 1.6 job openings for every unemployed person in March, well above the 1.0-1.2 range that is consistent with a jobs market that is not generating too much inflation.
Employers have been hoarding workers after experiencing difficulties finding labor in the wake of the COVID-19 pandemic.
Economists expected layoffs to increase as the effects of the punitive rate hikes spread through the economy and tightening financial conditions make it harder for small businesses to access credit. Most expect a mild recession by the second half of the year.
Minutes of the Fed’s May 2-3 policy meeting published on Wednesday showed that while “participants noted that the labor market remained very tight,” they “anticipated that employment growth would likely slow further, reflecting a moderation in aggregate demand coming partly from tighter credit conditions.”
The number of people receiving benefits after an initial week of aid, a proxy for hiring, fell 5,000 to 1.794 million during the week ending May 13, the claims report showed.
The so-called continuing claims covered the period during which the government surveyed households for May’s unemployment rate. Continuing claims dropped between the April and May survey weeks. The unemployment rate fell back to a 53-year low of 3.4% in April.
Labor market tightness is supporting wage growth, helping to drive consumer spending and keep the overall economy afloat.
In a separate report on Thursday, the Commerce Department confirmed economic growth slowed in the first quarter, restrained by businesses liquidating inventories. The inventory drawdown likely reflected strong consumer spending as well as businesses reducing stock in anticipation of a recession.
Gross domestic product increased at a 1.3% annualized rate last quarter, the government said in its second estimate of first-quarter GDP growth. That was revised up from the 1.1% pace reported last month. The economy grew at a 2.6% pace in the fourth quarter. Economists had expected first-quarter GDP growth would be unrevised.