The number of Americans filing new applications for unemployment benefits increased the most in five months last week, but the underlying trend in claims remained consistent with a steadily slowing labor market.
The larger-than-expected increase in initial claims reported by the Labor Department on Thursday was likely the result of snowstorms in many parts of the Midwest and Northeast. The data also included the Presidents’ Day holiday, which could have injected some volatility. There were no signs yet that mass layoffs of federal government employees were boosting claims, though that could change in the coming weeks as more workers are fired.
“Extreme winter weather was chiefly responsible for the pickup in initial claims last week,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
Initial claims for state unemployment benefits jumped 22,000 to a seasonally adjusted 242,000 for the week ended February 22, the Labor Department said. The increase was the biggest since last October. Economists polled by Reuters had forecast 221,000 claims for the latest week.
Unadjusted claims fell 2,997 to 220,541 last week. There were steep declines in California, Kentucky, Texas, Washington state and Tennessee. They more than offset a jump of 3,731 in filings in Massachusetts and an increase of 2,055 in Rhode Island. There was also a significant rise in applications in Illinois.
A separate unemployment compensation for federal employees (UCFE) program, which is reported with a one-week lag, showed 614 people filed for benefits during the week ending February 15, up by only one from the previous week. Tech billionaire Elon Musk’s Department of Government Efficiency, or DOGE, – an entity created by Republican President Donald Trump – has been laying off probationary federal government workers, most of whom were fired around February 14.
More layoffs are coming as part of efforts by the Trump administration to slash spending and shrink the federal government. Employers with government contracts have also been affected by the spending cuts and have resulted in rises in initial claims in Washington, D.C., in recent weeks.
Economists have warned that the reduction of money flowing into the economy from spending cuts and the loss of pay could cause private-sector job losses.
“These firings likely add up to the biggest layoffs in the history of the United States,” said Michele Evermore, a senior Fellow at the National Academy of Social Insurance. “Economic pain is contagious, so it is likely that the federal layoffs will cause more economic hardship.”
For now, state unemployment claims continue to signal no material shift in labor market conditions. The four-week moving average of claims, considered a better measure of labor market health as it irons out seasonal volatility from the data, increased 8,500 to 224,000 last week.
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