Jobless claims spike, in worrisome sign for the US labor market – CNN

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First-time applications for unemployment benefits rose much more than expected last week, a likely indication of some “noisy” data, but also a potential worrisome hint that cracks may be forming in America’s long-solid labor market.

There were an estimated 242,000 jobless claims filed last week, according to seasonally adjusted data released Thursday by the Department of Labor. That’s an increase of 22,000 from the prior week’s tally and a figure that landed well above economists’ expectations for 220,000 claims.

It’s the largest weekly spike in claims in more than four months and the weekly claims — a proxy for layoffs — are at their highest level since early December, Labor Department data shows.

Initial claims data, while one of the timeliest indicators of labor market health, also can be quite volatile and fluctuate from week to week due to factors such as weather, temporary layoffs, other state-level factors, and holidays.

In addition to last week being a holiday week, a deadly winter storm and frigid cold hit many states.

However, considering that the Trump administration is taking a figurative chainsaw through the employment ranks of the US government, the weekly claims data has risen in importance.

Based on Thursday’s data, it’s not yet known to what extent the widespread layoffs occurring within the US government are pushing up claims.

In Thursday’s report, Washington, DC, reported an increasing number of first-time claims; however, nearby Maryland and Virginia showed the opposite for the week ended February 22.

Also, it’s important to note that initial state-level data has quirks and caveats of its own, and proper comparisons can’t be made until additional time has passed.

Federal worker-specific unemployment data is lagged by a week, and Thursday’s report did not indicate a meaningful jump from the week before.

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“We will have to wait another week for the detail on precisely how many initial claims were filed nationwide by former Federal civilian employees, but the number totaled 614 in the week ending February 15, up just one — that’s not a misprint — on the previous week,” Samuel Tombs, chief US economist for Pantheon Macroeconomics, wrote in a note to investors on Thursday. “It will take another week or two for the job cuts implemented mid-month to come through fully in the claims data.”

Also, it’s possible that hundreds of thousands of government workers could be laid off as Elon Musk and the Department of Government Efficiency slash roles; however, the impact on US labor market data might not happen in one fell swoop, economists say.

“Do not expect a bursting of the pipes in initial claims and unemployment yet,” Joe Brusuelas, principal and chief economist at RSM US, said Thursday. “For now, it’s more likely to be a steady drip, drip, drip in the pace of firings.”

While some federal employees have been laid off in recent weeks, others are serving out a paid notice period where they essentially quit but won’t be unemployed weeks or even months from now.

“There’s likely to be some upward pressure in terms of the claims data, but I’m not expecting a 200,000 surge in the numbers,” Gregory Daco, chief economist at EY-Parthenon, told CNN in an interview.

Also, these layoffs aren’t expected to drag down February’s jobs report, Daco said.

“It’ll be more in the March jobs report just because of the timing of these layoffs,” he said. “And, let’s not forget, even if we’re talking about ’200,000 jobs lost’ at the federal level, that’s only a month of job growth that we would lose. It’s significant, but it’s a one-time hit in terms of the impact on the broader economy.”

The direct consequences are “maybe a tenth” of a percentage point of economic growth over the course of a year, Daco said.

However, he cautioned, that’s not where the biggest concern lies.

“The risk here is that you get a knock-on effect of individuals that lose their job and don’t find a new occupation in a different sector, and for those jobs, those individuals, they suddenly have to rely on unemployment payments, and they’re likely to scale back on their outlays, and that will then, in turn, affect broader economic activity,” he said.

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“That can have a consequence for sectors that are also dependent on federal spending, so contractors and those individuals might also be putting back on their spending. That’s the indirect effect that can be more significant there,” he added.

The February jobs report is scheduled to be released on March 7; and, for now, economists are expecting employment growth to pick up from January, which was likely weighed down by seasonality as well as wildfires and weather, economists say.

Economists expect the US to have added 160,000 jobs in February, an increase from January’s initial estimate of 143,000 jobs gained, according to FactSet consensus estimates.

Still, while job growth has eased and returned to pre-pandemic levels, the natural churn within the labor market (hirings and quits) have slowed dramatically, making it harder for unemployed people to find work.

Thursday’s report showed that continuing claims, which are filed by people who have received at least one week of unemployment benefits, dropped slightly by 5,000 to 1.862 million for the week ended February 15.
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Source: https://www.cnn.com/2025/02/27/economy/us-jobless-claims-layoffs/index.html