US jobless claims jump to highest level since October 2021

Latest report shows signs Federal Reserve's interest rates being felt in tight labour market

The figures showed there were 1.6 open positions available for every jobseeker. AFP

Jobless claims in the US soared to their highest level since October 2021 in another sign the Federal Reserve's aggressive interest rates are being felt across the economy — this time in the labour market.

Initial claims last week rose by 22,000 to a seasonally adjusted level of 264,000 in the week ending May 6. It is the highest level since October 2021, when jobless claims were at 264,000. Thursday's reading came in higher than estimations by Reuters and Bloomberg economists.

The four-week moving average was 245,250, an increase of 6,000 from the previous week. It is the highest average since November 2021.

US workers collecting unemployment benefits rose 12,000 to 1.813 million in the week ending April 29.

While Thursday's report shows signs of the labour market cooling, it still remains tight with 1.6 open positions available for every jobseeker. A report from the Labour Department last week showed employers added 253,000 jobs last month as the unemployment rate hit a historic low of 3.4 per cent.

The Fed has raised interest rates 10 times in the past 14 months by 5 per cent to 5.25 per cent, hoping that higher interest rates would lead to cool the labour market and wage growth.

Thursday's report comes as the US faces economic uncertainty, with Democratic and Republican leaders in a standoff over the debt ceiling. Failure to raise the debt limit could lead to a default and ensuing economic calamity — even in the short-term.

Speaking ahead of a meeting with her G7 counterparts in Japan, Treasury Secretary Janet Yellen warned a default would undermine gains the US economy made as it recovered from the Covid-19 pandemic and result in a “global downturn”.

Reuters contributed to this report