US Jobless Claims Decline, Reinforcing Strength in Labor Market

Both initial and continuing jobless claims declined for the week ending May 3.

A "Now hiring" sign during Black Friday at a mall in Hanover, Md., on Nov. 29, 2024. Madalina Vasiliu/The Epoch Times

The U.S. labor market is not signaling any signs of wider layoffs as the number of Americans filing for new applications for unemployment benefits declined last week, government data show.

According to new figures from the Department of Labor, released on May 8, initial jobless claims fell by 13,000 to 228,000 for the week ending May 3.

This came in below the consensus forecast of 230,000.

For the second consecutive week, the largest increases in initial jobless claims were centered in New York (15,418) and Massachusetts (3,301).

Continuing jobless claims—a measure of individuals who continue to receive unemployment benefits—declined by 29,000 to a lower-than-expected 1.87 million. The previous week’s number was adjusted lower to 1.9 million.

The four-week average, which removes the week-to-week volatility, jumped by 1,000 to 227,000.

Meanwhile, initial claims for unemployment benefits by former federal workers were little changed at 468. Continued jobless claims by former federal civilian employees rose by 82 to 6,716.

Despite deteriorating business and consumer sentiment, the gloomy outlook has yet to appear in the hard data.

Last week, the April jobs report showed that the U.S. economy added a better-than-expected 177,000 new jobs, and the unemployment rate was unchanged at 4.2 percent.

Global outplacement firm Challenger, Gray, and Christmas reported a sharp 62 percent drop in layoffs in April from the previous month.

However, market watchers say several forward-looking indicators signal softening in the jobs arena.

In March, the number of job openings fell by 288,000 to a six-month low of 7.19 million. Additionally, the Federal Reserve’s latest Beige Book report—a survey of business contacts in the U.S. central bank’s 12 regional districts—revealed slowing hiring plans “until there is more clarity on economic conditions.”

Wages and Productivity

New Bureau of Labor Statistics data, published on May 8, revealed that unit labor costs surged by 5.7 percent in the first quarter, from a downwardly revised 2 percent in the fourth quarter.

The headline reading came in higher than the market forecast of 5.1 percent.

Hourly compensation advanced by 4.8 percent, up from 3.7 percent in the previous quarter.

An increase in unit labor costs typically suggests that wages are growing faster than productivity, which can lead to price inflation as businesses would pass costs onto consumers.

In the first three months of 2025, non-farm productivity fell for the first time in almost three years, by 0.8 percent. Output slipped 0.3 percent, but hours worked climbed by 0.6 percent.

An employee works on an assembly line at startup Rivian Automotive's electric vehicle factory in Normal, Ill., on April 11, 2022. Kamil Krzaczynski/Reuters

This was down from an upwardly adjusted 1.7 percent increase in the previous quarter. The decline was also worse than economists’ expectations.

Resilient Economic Data

While economists’ recession odds have increased in recent weeks, the numbers show that the country is still managing the tariff turbulence.

“We continue to see the hard data showing economic strength,” Gina Bolvin, president of Bolvin Wealth Management Group, said in a note emailed to The Epoch Times. “The US economy continues to be incredibly resilient.”

After the first quarter’s import-driven 0.3 percent contraction, the Atlanta Federal Reserve Bank’s widely watched GDPNow Model estimate anticipates a rebound in the second quarter. The April–June GDP growth rate could top 2 percent as the tariff shock subsides.

Following its May Fed policy meeting on May 7, the interest rate-setting Federal Open Market Committee (FOMC) highlighted that economic activity persists amid widespread uncertainty.

“Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated,” the FOMC statement reads.

Still, U.S. central bank officials fear a stagflation environment as “the risks of higher unemployment and higher inflation have risen,” the FOMC said.

Chris Zaccarelli, chief investment officer of Northlight Asset Management, says Wall Street will continue to worry about a recession until the White House announces more trade deals.

“The markets are going to increasingly worry about a recession, and unless some trade deals are made before the tariff pause runs out, we are going to see markets drop again like they did in early April,” Zaccarelli said in a note to The Epoch Times.

In a Truth Social post on May 8, President Donald Trump confirmed that the United States and the United Kingdom have reached a “full and comprehensive” new trade agreement.