U.S. weekly unemployment claims surge, suggesting labour market slowing

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Initial claims for state unemployment benefits jumped 28,000 to a seasonally adjusted 261,000 for the week ended June 3, the U.S. Labor Department said

The number of Americans filing new claims for unemployment benefits surged last week, suggesting that the labour market was slowing amid mounting risks of a recession.

Despite the surge in applications, claims remain at levels consistent with a tight labour market. The government reported last week that the economy added 339,000 jobs in May. Although the unemployment rate increased to a seven-month high of 3.7 per cent from 3.4 per cent in April, it remains low by historical standards.

The jump in claims was a sign of more cracks forming in the labour market. The Institute for Supply Management reported on Monday that its services PMI dropped in May, attributed mostly to weakness in employment. That aligns with economists’ belief that the economy will soon feel the full impact of the 500 basis points worth of interest rate increases from the Federal Reserve since March 2022 to tame inflation.

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