WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits increased more than expected last week, but remained at a level consistent with tightening labor market conditions and further wage gains.
Initial claims for state unemployment benefits rose 19,000 to a seasonally adjusted 200,000 for the week ended April 30, the Labor Department said on Thursday. Economists polled by Reuters had forecast 182,000 applications for the latest week.
Claims had hovered below the 200,000 level since mid-February amid strong demand for workers. Government data this week showed there were a record 11.5 million job openings on the last day of March, which widened the jobs-workers gap to a record 3.4% of the labor force from 3.1% in February.
The labor market imbalance is forcing employers to increase wages, contributing to soaring inflation. Compensation for American workers logged its largest increase in more than three decades in the first quarter, government data showed last week.
On Wednesday, the Federal Reserve raised its policy interest rate by half a percentage point, the biggest hike in 22 years, and said the U.S. central bank would begin trimming its bond holdings next month as it battles sky-high inflation.
It started raising rates in March. Fed Chair Jerome Powell told reporters that “the labor market is extremely tight, and inflation is much too high.”
Claims, which have dropped from a record high of 6.137 million in early April 2020, will be closely watched for signs of whether rising borrowing costs are curbing demand.
The government is expected to report on Friday that nonfarm payrolls increased by 391,000 jobs in April after rising 431,000 in March, according to a Reuters survey of economists. Job growth has exceeded 400,000 for 11 straight months.
But there are signs that high labor costs are starting to hurt small businesses, especially those in the leisure and hospitality industry.
A separate report from global outplacement firm Challenger, Gray & Christmas on Thursday showed job cuts announced by U.S.-based companies increased 14% to 24,286 in April.
The second straight monthly increase in layoffs was led by the leisure and hospitality industry.
“Job cut plans appear to be on the rise, particularly as companies assess market conditions, inflationary risks, and capital spending,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas. “Workers who are being cut will have lots of opportunities and will likely land quickly.”
The rise in layoffs was in sync with the ADP National Employment report on Wednesday, which in April showed the smallest private payrolls gain in two years as employment at businesses with less than 50 workers fell. The leisure and hospitality sector added the fewest jobs since late 2020.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
