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By Lucia Mutikani
WASHINGTON (Reuters) -The number of Americans filing new applications for unemployment benefits dropped last week, suggesting the economy maintained a steady pace of job growth in May, though it is becoming harder for those out of work to find new opportunities.
The weekly jobless claims report from the Labor Department on Thursday showed unemployment rolls approaching levels last seen in late 2021. While employers are hoarding workers, they remain reluctant to increase headcount because of economic uncertainty stemming from President Donald Trump’s policies, including a shifting position on tariffs and mass layoffs of federal government workers.
"Employers have so far elected to keep their staff headcounts steady despite the swirling winds of unprecedented policy changes for the economy emanating from down in Washington," said Christopher Rupkey, chief economist at FWDBONDS. "There is no serious deterioration in the labor market to date, and the economy is weathering the storm for now."
Initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 227,000 for the week ended May 17. Economists polled by Reuters had forecast 230,000 claims for the latest week.
They expect claims in the coming weeks to drift into the upper end of their 205,000-243,000 range for this year, mostly driven by difficulties adjusting the data for seasonal fluctuations. That would not suggest a material shift in labor market conditions. Economists, however, see layoffs picking up in the second half of 2025 as the administration’s import duties dampen demand, snarl supply chains and stoke inflation.
There has been an increase in the number of federal employees filing for unemployment benefits. A separate unemployment compensation for federal employees (UCFE) program, which is reported with a one-week lag, showed applications surging during the week ending May 10 compared to a year ago.
Tech billionaire Elon Musk’s Department of Government Efficiency, or DOGE, has aggressively sought to lay off federal workers as part of an unprecedented campaign by the Trump administration to cut spending and downsize the government.
LONG UNEMPLOYMENT SPELLS
The claims data covered the period during which the government surveyed businesses for the nonfarm payrolls component of May’s employment report. Claims rose marginally between the April and May survey periods.
The economy added 177,000 jobs in April. Economists expect job growth to slow below 100,000 per month, which they say is needed to keep up with growth in the working-age population.
Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will shed more light on the health of the labor market in May.
The so-called continuing claims increased by 36,000 to a seasonally adjusted 1.903 million during the week ending May 10, moving back to levels last seen in late 2021, the claims report showed.
Employers’ hesitancy to add to headcount has left many people who lose their jobs to experience long spells of unemployment. The median duration of unemployment jumped to 10.4 weeks in April from 9.8 weeks in March.
"The slight rise in continuing claims could be interpreted as a sign of weaker demand for labor, indicating that some individuals may be having a harder time finding employment at present," said Carl Weinberg, chief economist at High Frequency Economics. "But really, if the labor market were really softening in an incipient recession, you would not have to squint at the chart to see it."