US jobless claims fall to 209,000 as US labour market remains relatively stable

The number of Americans filing new applications for unemployment benefits fell slightly last week, suggesting the US labor market remains relatively stable even as policymakers grow increasingly concerned about inflation pressures tied to the conflict between Israel and Iran.

Data released on Thursday showed initial claims for state unemployment benefits dropped by 3,000 to a seasonally adjusted 209,000 in the week ended May 16.

Economists polled by Reuters had forecast 210,000 claims for the latest week.

The claims figures continue to point to a labor market that has slowed from the rapid pace seen over the past two years but remains resilient despite economic uncertainty and elevated interest rates.

Fed officials weigh inflation risks

The labor market data came as investors digested minutes from the Federal Reserve’s April policy meeting, which showed growing concern among policymakers about inflation risks linked to the Middle East conflict.

The war between Israel and Iran has disrupted shipping through the Strait of Hormuz, pushing oil prices sharply higher and lifting costs for commodities including fertilizers, petrochemicals and aluminum.

Minutes from the Federal Open Market Committee’s April 28-29 meeting showed that most officials viewed recent employment data as relatively stable.

However, policymakers also acknowledged that inflation risks had intensified because of rising energy prices.

Officials “generally expected labor market conditions to remain stable in the near term,” according to the minutes, though most participants judged that “risks to the employment side” of the Fed’s dual mandate were tilted to the downside.

The minutes also showed that a growing number of policymakers believed the central bank should begin laying the groundwork for a potential rate increase if inflation pressures persist.

Financial markets are currently pricing in a higher probability that the Fed’s next move could eventually be a rate hike by late 2026 or early 2027, even as President Donald Trump has publicly expressed support for lower interest rates following the appointment of former Fed Governor Kevin Warsh as chair.

Hiring signals remain mixed

While layoffs remain historically low, other labor market indicators suggest hiring momentum may be cooling.

Continuing claims, which track the number of people receiving unemployment benefits after an initial week of aid and are viewed as a proxy for hiring conditions, rose by 6,000 to 1.782 million in the week ended May 9.

The insured unemployment rate was unchanged at 1.2%.

Last week’s claims report also coincided with the survey period for the government’s monthly nonfarm payrolls report for May.

Payroll growth slowed to 115,000 jobs in April after employers added 185,000 positions in March, pointing to a moderation in labor demand as businesses navigate elevated borrowing costs and geopolitical uncertainty.

Although economists expect jobless claims to drift higher during the summer because of seasonal factors, the overall labor market continues to hold steady for now, complicating the Federal Reserve’s efforts to balance inflation control with sustaining economic growth.

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