Initial claims for unemployment insurance (UI) increased by a large 28,000 to 261,000 for the week ending June 3 from 233,000 in the previous week. The four-week moving average of claims, which smooths out some of the weekly volatility, increased by 8,000 to 237,000. A new plateau in the initial claims does seem to have formed at close to 235,000. This four-week moving average level of Initial claims reflects an increase from the sub-200K level that had been the lowest observed for UI claims since the data began in the late 1960s. Weekly claims are up from exceptionally low levels throughout 2022 which sometimes dipped below 200,000 per week.

Continuing claims decreased by a large 37,000 to 1,757,000 in the week ending May 27. The four-week moving average of continuing claims decreased by 13,000 to 1,785,000. The insured unemployment rate held steady at 1.2% in the week ending May 27, a record low. 

Job losses have begun to spread from the tech and finance industries that had dominated headlines through the end of last year and into the first five months of 2023. Headline-grabbing layoff announcements, however, typically take some time to be put into effect. This delay accounts for the recent rise in initial claims, based upon high-profile layoff announcements over that spanned the transition from 2022 into 2023. This effect could also portend another escalation in the months to come, alongside the ever-widening net of jobs cuts spreads across industries. 

PNC continues to forecast that the FOMC will play “hopscotch” by “hopping, skipping, or jumping” over a rate hike at their June 14 meeting. A small rise (0.1%) in the May headline CPI released on June 13 will reinforce the FOMC’s decision to hold tight. We expect the funds rate to plateau at the current 5.00-5.25 percent target range until rate cuts start in early 2024. This “pause” will provide one less complicating factor in evaluating the full impact of the past year’s rapid monetary policy tightening pace on labor markets, layoffs, and consumer demand. U.S. labor markets continue to experience exceptionally tight conditions, but the sustained increase in UI claims and potential further uptrend as a result of spreading layoff announcements could be the first steps along a path to more balanced labor market conditions.

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