US jobless claims fall, but June unemployment rate likely to rise amid hiring slowdown

The number of Americans filing for first-time unemployment benefits dropped last week, signaling a marginal improvement in labor market conditions. Initial claims for state jobless benefits fell by 10,000 to a seasonally adjusted 236,000 for the week ended June 21, the US Labor Department reported on Thursday (June 26).

The figure came in below economists’ expectations of 245,000, despite seasonal volatility linked to the Juneteenth holiday.

Volatility around holidays, school breaks

Claims data tend to fluctuate around public holidays, and analysts pointed to technical factors and the start of summer school breaks as partial contributors to the recent rise in claims. In some states, non-teaching school staff are eligible to claim unemployment benefits during the summer months, temporarily boosting filings.

Layoffs on the rise

While jobless claims remain within the 205,000–250,000 range observed in 2024, layoffs have increased, prompting concerns among economists. Many point to uncertainty stemming from President Donald Trump’s broad tariffs, which have made it harder for businesses to plan hiring and investment.

Fed holds rates amid economic uncertainty

The Federal Reserve has paused its interest rate cuts, maintaining the benchmark rate in the 4.25%–4.50% range since December. Fed Chair Jerome Powell told lawmakers this week that more time is needed to assess the inflationary impact of tariffs before adjusting policy further.

Hiring slows, continuing claims climb

Though layoffs remain historically low, a sluggish hiring environment is limiting job opportunities. Continuing claims—the number of people receiving benefits beyond the first week—rose by 37,000 to 1.974 million for the week ending June 14. That marks the highest level since November 2021 and suggests that laid-off workers are finding it harder to secure new jobs.

Unemployment rate seen rising in June

The rise in continuing claims coincided with the reference week for the June jobs report, prompting several economists to forecast a rise in the unemployment rate to 4.3% from 4.2% in May. Supporting that outlook, a Conference Board survey this week showed that the share of Americans viewing jobs as "plentiful" fell to its lowest since early 2020.

(With Reuters inputs)