New unemployment claims in the U.S. saw their largest increase in five months last week, though the overall trend in claims still reflects a slowing labor market. The rise in claims was largely attributed to snowstorms across many parts of the country and the Presidents’ Day holiday, which likely caused some volatility in the data.
According to the Labor Department’s report on Thursday, initial claims for state unemployment benefits rose by 22,000 to a seasonally adjusted 242,000 for the week ending February 22. This marked the biggest increase since last October, surpassing economists’ expectations, who had predicted 221,000 claims.
“Extreme winter weather was chiefly responsible for the pickup in initial claims last week,” said Samuel Tombs, Chief U.S. Economist at Pantheon Macroeconomics.
Despite the increase in claims, unadjusted claims fell by nearly 3,000 to 220,541. Notable declines in claims were seen in California, Kentucky, Texas, Washington state, and Tennessee, though increases were reported in Massachusetts, Rhode Island, and Illinois.
A separate program for federal employees, which reports with a one-week lag, showed 614 claims for the week ending February 15, a slight increase of one from the previous week. The ongoing layoffs of probationary federal workers under the Trump administration’s Department of Government Efficiency (DOGE) may lead to more claims in the coming weeks.
Joseph Brusuelas, Chief Economist at RSM US, estimated that between 200,000 and 300,000 federal full-time employees and 450,000 contractors could be affected by the cuts.
Economists warn that the loss of federal government jobs and spending reductions may ripple into the private sector, potentially causing additional job losses. “These firings likely add up to the biggest layoffs in the history of the United States,” said Michele Evermore, a Senior Fellow at the National Academy of Social Insurance.
For now, the broader labor market remains stable, as reflected by the four-week moving average of claims, which rose by 8,500 to 224,000. Historically low layoffs continue to support the economy’s expansion.
The U.S. Federal Reserve has maintained its interest rates at 4.25%-4.50%, allowing policymakers to keep monitoring the economic impact of the Trump administration’s fiscal and trade policies. The Fed’s recent meeting minutes indicate concerns about inflation, with a core PCE inflation rate of 2.7% for the fourth quarter, up from the previously reported 2.5%.
Meanwhile, U.S. economic growth for Q4 was confirmed at a 2.3% rate, a slowdown from the 3.1% recorded in the previous quarter. The labor market remains strong, but consumer sentiment about job availability has weakened, with the percentage of consumers who view jobs as “plentiful” dropping to a five-month low.
On the business side, non-defense capital goods orders, a key indicator of future spending, surged by 0.8% in January. However, some economists believe that the increase is likely a result of businesses rushing to place orders before tariffs are implemented, potentially causing a slowdown later in the year.
Overall, while the U.S. labor market remains healthy, the rising jobless claims and economic uncertainties signal caution in the coming months.
