U.S. Jobless Claims Hit 247K; Rising Averages Signal Labor Market Softening

Jobless Claims Increase, Moving Average Hits 2021 High

Initial claims for U.S. unemployment insurance rose by 8,000 to a seasonally adjusted 247,000 in the week ending May 31, marking the highest level since August 2023. The four-week moving average climbed by 4,500 to 235,000, its highest since November 2021. While last week’s level was revised slightly downward, the consistent upward movement suggests pressure is building in the labor market.

Insured Unemployment Declines, but Four-Week Average Rises

Despite the uptick in initial claims, seasonally adjusted insured unemployment fell slightly to 1.904 million for the week ending May 24—a drop of 3,000. However, the four-week average of continuing claims rose to 1.895 million, the highest since late 2021. The insured unemployment rate ticked down to 1.2%, a marginal decline of 0.1 percentage points, reflecting short-term stability even as underlying trends suggest broader softening.

Unadjusted Claims Signal Seasonal Mismatch

Unadjusted initial claims dropped by 1.5% to 208,642, but the decline was smaller than the expected 5%, implying weaker-than-usual seasonal hiring activity. Compared to the same week in 2024, unadjusted initial claims are up by more than 12,000. Insured unemployment on an unadjusted basis also fell by 18,524 to 1.757 million, slightly exceeding seasonal expectations but still reflecting labor market slack in some sectors.

Manufacturing Sector Drives State-Level Increases

Michigan and Nebraska posted notable increases in claims (+3,259 and +1,328 respectively), attributed to layoffs in the manufacturing sector. California also saw an increase of over 1,000 new claims. In contrast, Texas, Massachusetts, and Illinois reported the largest week-over-week declines in initial claims. States with the highest insured unemployment rates included New Jersey (2.2%), California and Washington (2.1%), and Massachusetts (1.9%), indicating sector-specific stress in these regions.

Market Forecast: Labor Market Softening Signals Bearish Tilt

The rise in initial claims and the upward trend in the four-week averages—both for initial and continuing claims—point to a gradual loosening of labor market conditions. While not yet signaling a sharp downturn, the persistence of elevated claims levels supports a bearish short-term outlook for labor-sensitive sectors and may increase expectations for Federal Reserve policy easing later this year. Traders should monitor incoming jobs data closely for confirmation of these trends.