Continuing unemployment claims hit highest level in more than 2 years

It may be another data point that helps convince the Fed to start cutting interest rates.

The number of Americans who filed for unemployment insurance for the first time this week came in at 243,000, according to new Labor Department data. That’s up 20,000 from the week before, a bit more than economists were expecting.

And it’s the most since August 2023.

Meanwhile, the number of continuing claims for unemployment — people who claimed unemployment insurance last week and also claimed it the week before — rose to just shy of 1.9 million people. And that is the most since November 2021.

The uptick in continuing claims means it’s taking job seekers longer to find the right match. That can be stressful if you’re out of work, said Tuan Nguyen, an economist with RSM. But, overall, he said it’s a good sign for a labor market that’s been dealing with a worker shortage for years.

“We are having a labor market that is cooling down toward normalizations and balance, not a labor market that will hit a cliff anytime soon,” Nguyen said.

One possible contributor to last week’s rise in claims: Hurricane Beryl. The storm disrupted life for millions on the Gulf Coast. That includes job seekers and employers, said Elizabeth Davis, an economist at the University of Minnesota. 

“They’ve got other things to deal with in the immediate aftermath of a big storm like that,” Davis said.

Hurricane aside, Davis said the unemployment data tells us something about the effect of the elevated interest rates we’ve seen for the past two years. 

“It suggests that the Fed policies to bring down inflation are working without causing a recession,” Davis said. “There’s no recession on the horizon, but the labor market is slowing down a little bit.”

Which is exactly what the Fed wants to see, said Scott Wren, senior global market strategist at the Wells Fargo Investment Institute. 

“The Federal Reserve’s never going to tell you they want a higher unemployment rate,” Wren said. “They will never specifically state that, but that’s what they want, to take some pressure off of wages.” 

Because rising wages can fuel inflation, and the continuing claims numbers add to a growing stack of data that might convince the Fed it’s finally time to cut interest rates, according to Kevin Lang, an economist at Boston University.

If he were at the Fed, “I would look at this and say, ‘Well, it’s one more piece of evidence that we’re moving towards the kind of economy that we want, with 2% inflation and relatively low unemployment,” Lang said.

Which means, Lang said, it could be time to let up on the economic brakes.