(Reuters) – The number of Americans receiving unemployment benefits fell for the first time last week, Labor Department data released on Thursday showed, but the overall number of recipients rose a week ago to the highest level since January, suggesting the U.S. job market continues to cool.
Meanwhile, the housing market continues to struggle under the weight of high interest rates imposed by the Federal Reserve, as new housing starts and applications for permits for future homebuilding projects both fell to their lowest levels in nearly four years in May, according to separate Census Bureau data.
New claims for state unemployment insurance fell by 5,000 to a seasonally adjusted 238,000 for the week ended June 15, according to the Labor Department, wiping out a 5,000 jump the previous week that had pushed claims to a 10-month high.
Economists polled by Reuters had expected jobless claims to reach 235,000 in the latest week.
Labor market momentum has weakened in line with the overall economy following the Fed’s 525 basis point interest rate hike to tame inflation since 2022. Easing labor market conditions have eased inflationary pressures, and financial markets are expecting one or more rate cuts this year, despite Fed policymakers’ more hawkish outlook.
The Federal Reserve has kept its benchmark overnight interest rate at its current range of 5.25% to 5.50% since July last year, and at its meeting last week it reduced the number of rate cuts it expects to make this year by 0.25 percentage points to one, down from three as of March.
The jobless claims data covers the period when the government surveyed employers for nonfarm payrolls in its June jobs report.
Job growth accelerated in May, but that likely overstated the health of the labor market: The unemployment rate rose to 4.0% in May for the first time since January 2022, amid signs that laid-off workers are having a harder time finding new jobs.
Data next week on the number of people receiving benefits after the first week of aid, a gauge of employment, could provide further clues about labor market conditions in June. So-called continuing claims for jobless benefits rose slightly to a seasonally adjusted 1.828 million in the week ended June 8, the highest level since early January.
“Initial jobless claims suggest that May’s gains in nonfarm payrolls will not be replicated in June,” Ryan Sweet, chief U.S. economist at Oxford Economics, wrote in response to the latest jobless claims data. “The risks to the labor market should grab the Federal Reserve’s attention.”
Weakness in housing construction
Census data shows the housing market remains under pressure as the Federal Reserve’s strict policies keep borrowing costs high to buy a home.
Total housing starts fell 5.5% last month, the lowest since June 2020, driven mostly by a sharp decline in multifamily projects. Single-family housing starts, which account for the majority of residential construction, also fell, falling 5.2% last month to a seasonally adjusted annual rate of 982,000, the lowest since October.
April data was revised upward, showing single-family housing starts rising to 1.036 million from the previously reported 1.031 million.
The average interest rate on the popular 30-year fixed mortgage continues to fall after rising above 7% again in April and May. Rates fell to 6.95% last week, according to data from mortgage lender Freddie Mac, as labor market conditions eased and the Federal Reserve is again on the table after two interest rate cuts this year.
Permits, a gauge of future homebuilding plans, fell 3.8%, along with construction starts, to the lowest since June 2020. Permit applications for single-family homes fell 2.9%, to 949,000, the lowest level in nearly a year, while applications for apartment building permits fell to the lowest level since April 2020.
Data on Wednesday showed that business sentiment among homebuilders unexpectedly weakened this month.
(Reporting by Lucia Mutikani, Lindsay Dunsmuir and Dan Burns; Editing by Chizu Nomiyama)