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Unemployment claims rise to highest level in 8 months, signaling slowdown in job market

Initial claims for U.S. unemployment benefits last week rose to their highest level in eight months, a sign the labor market might be losing steam as concerns over tariffs take hold of U.S. businesses and consumers. 

New applications for jobless benefits in the week ending May 31 reached 247,000, up 8,000 from the week prior, data from the Labor Department shows. The figure exceeded economists’ predictions of 235,000 claims, according to financial data firm FactSet. 

Overall filings for unemployment claims remain at historic lows. The total number of Americans receiving unemployment benefits for the week of May 24 was 1.9 million, down 3,000 from the week prior. 

Still, the uptick in initial jobless claims last week is “hard to dismiss,” Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, said, as the climb could point to broader shifts in the workforce ahead of the May jobs report, to be released tomorrow. 

“Moreover, a relatively weak hiring rate means that the share of newly unemployed workers who are struggling to find a new job quickly is slowly creeping up, too,” he said in an email note. “The further downward pressure on hiring from tariff-related uncertainty will add to these growing strains on the jobs market.”

Jobless claims have mostly floated between 200,000 to 250,000 since the COVID-19 pandemic in 2020 upended the labor market. 

“Jobless claims continue to rise, but they are rising at a slow pace, so it’s a trend worth watching, but too soon to sound the alarm,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management.

Firings overseen by the Trump Administration’s Department of Government Efficiency, commonly known as DOGE, are the leading cause of job cuts in 2025, with over 280,000 federal workers abruptly terminated from jobs so far this year, according to outplacement firm Challenger, Gray & Christmas. 

Other signs of potential slowdown

A national employment report released yesterday by ADP, a payroll and human resources software provider, found that the U.S. economy added 37,000 jobs in May, the lowest pace of hiring since May 2023. 

“After a strong start to the year, hiring is losing momentum,” said Nela Richardson, chief economist at ADP, in a statement Wednesday.

Another sign of a cooling labor market: The number of Americans who quit their jobs fell in April, while layoffs climbed, according to the most recent data from the U.S. Bureau of Labor Statistics. That’s despite the fact job openings for the month increased, reaching 7.4 million in April. 

Layoffs at large U.S. companies

Several major companies have revealed layoffs this year including Walmart, which announced in late May that it was reducing 1,500 employees from its global tech workforce in a bid to increase efficiency rapidly evolving technological advances. 

On Thursday, Consumer goods retailer Procter & Gamble, the company behind many major household brands including Tide detergent, Bounty paper towels and Pampers diapers, announced this week that it would cut 7,000 employees from its workforce over the next two years, as it competes in an “increasingly challenging environment.”

Workday, Dow, CNN, Starbucks, Southwest Airlines, Walt Disney Co., Microsoft and Facebook parent company Meta have also announced layoffs this year.

While job cuts by U.S.-based employees were down 12% in May from the previous month, according to new data from Challenger, Gray & Christmas, they are up 47% from the same month last year. 

“Tariffs, funding cuts, consumer spending and overall economic pessimism are putting intense pressure on companies’ workforces,” said Andrew Challenger, senior vice president of the outplacement firm. Many companies have lowered their sales and profit expectations for 2025 in their recent earnings statements. And consumer confidence remains shaky, despite some signs of relief. 

The Labor Department is expected to report Friday that employers added 130,000 jobs last month, down from 177,000 in April. The unemployment rate is expected to stay at a low 4.2%, according to a survey of forecasters by the data firm FactSet.

The Associated Press

contributed to this report.

Mary Cunningham

Mary Cunningham is a reporter for CBS MoneyWatch. Before joining the business and finance vertical, she worked at “60 Minutes,” CBSNews.com and CBS News 24/7 as part of the CBS News Associate Program.

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Are you “functionally unemployed”? Here’s what the unemployment rate doesn’t show.

While the unemployment rate remains near a 50-year low, another measure of worker well-being indicates there may be bigger cracks in the labor market.

The low unemployment rate, which stood at 4.2% in April, has signaled to economists and investors alike that the U.S. economy remains relatively healthy. Employers are also continuing to hire despite headwinds like tariffs and plunging consumer confidence. 

But another indicator suggests those pieces of government data may be painting an overly rosy picture of the economy, with a recent report from the Ludwig Institute for Shared Economic Prosperity (LISEP) finding the “true rate” of unemployment stood at 24.3% in April, up slightly from 24% in March, while the official Bureau of Labor Statistics rate remained unchanged at 4.2% over the same period.

LISEP’s measure encompasses not only unemployed workers, but also people who are looking for work but can’t find full-time employment, as well as those stuck in poverty-wage jobs. By tracking functionally unemployed workers, the measure seeks to capture labor market nuances that other economic indicators miss, such as Americans who are left behind during periods of economic expansion.

“The unemployment data, as it’s put out, has some flaws,” LISEP chairman Gene Ludwig told CBS MoneyWatch. “For example, it counts you as employed if you’ve worked as little as one hour over the prior two weeks. So you can be homeless and in a tent community and have worked one hour and be counted, irrespective of how poorly-paid that hour may be.”

LISEP, in a working paper on the gauge, says the measure prevents part-time jobs or poorly paid work from being counted as equal to full-time and better-paid work. LISEP also argues that the unemployment rate “presents a very incomplete and, in many ways, misleading picture.”

In other words, people who lack steady work and don’t earn living wages shouldn’t be counted as functionally employed. Its True Rate of Unemployment (TRU), which began tracking the measure in 2020, encapsulates workers whose earnings don’t allow them to make ends meet, and are struggling just to get by, according to LISEP. 

“If you’re part time and can’t get a full-time job, then we count you as functionally unemployed,” Ludwig noted. “We also count as functionally unemployed people who don’t earn above a poverty wage.”

“Survival mode”

In so doing, it counts workers who can’t afford to put roofs over their heads, can’t procure nuturious meals and don’t have the ability to save as being functionally unemployed. 

“You don’t have anything that gets you to the first rung of the American dream ladder. You’re in survival mode,” Ludwig said. 

When broken down by race and gender, TRU shows Hispanic, Black and women workers faring worse than White workers, as well as men. 

More than 28% of Hispanic workers, and nearly 27% of Black workers are functionally unemployed, compared to 23% of White workers. And more female workers — 28.6% — are functionally unemployed than male workers, whose true rate of unemployment stands at 20%, according to LISEP.

Millions of households are currently struggling to maintain a “minimal quality of life,” according to another recent analysis from LISEP. 

Its research found that the lowest-earning Americans around the U.S. are falling well short of what they need to maintain a decent standard of living. These households earned an average of $38,000 per year in 2023, but would need to make $67,000 to afford the items the group tracks as part of its index, which also includes the cost of professional clothing and basic leisure activities. 

The wide chasm between the the BLS’s measure of unemployment and its true rate of unemployment is also concerning, according to Ludwig. 

“If you say there’s 4.2% unemployment, which makes political folks happy because it’s a low number, it causes all kinds of poor policy decisions and assumes we are better off than we are,” Ludwig said. “There’s less energy and less of a push to improve employment, and the people who get hurt at middle- and low-income Americans.” 

Megan Cerullo

Megan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News 24/7 to discuss her reporting.

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State unemployment ticks up

The statewide unemployment rate climbed again in April to 4.6%, slightly widening the gap with the national joblessness rate, labor officials said.

Citing federal data, the Executive Office of Labor and Workforce Development announced that unemployment in Massachusetts rose two-tenths of a percentage point from March to April. The national unemployment rate remained level at 4.2% in that span.

It was the fourth straight month that both the labor force and the unemployment rate grew. Compared to April 2024, the labor force included about 52,000 more people and the unemployment rate was 0.7 percentage points higher.

Employers also added about 7,700 jobs in April, according to results of a different monthly labor survey, building on the 2,800 positions added in March.

Department of Economic Research Chief Economist Mark Rembert said Friday that the job market remained stable “despite economic headwinds.”

“The unemployment rate edged up, but most significantly, we haven’t seen an uptick in layoffs or new unemployment claims, meaning the uptick is being driven by more people entering the workforce and looking for work,” Rembert said in a statement.

While employment is relatively stable, many businesses have voiced low confidence in the local economic outlook amid uncertainty about federal spending and tariffs. Economists have also forecast sluggish growth in Massachusetts.

Earlier this month, federal economists reported that U.S. employers added a surprisingly strong 177,000 jobs in April and the unemployment rate held at a historically healthy 4.2%.

Many economists still anticipate that a negative impact from trade wars will materialize this year for American workers.

Last Tuesday, Microsoft began laying off about 6,000 workers, nearly 3% of its workforce and its largest job cuts in more than two years as the company spends heavily on artificial intelligence.

Other companies that have announced job cuts this year include Workday, Dow, CNN, Starbucks, Southwest Airlines and Facebook parent company Meta.

The Labor Department’s most recent  said that the four-week average of claims, which softens some of the week-to-week fluctuations, rose by 3,250 to 230,500.

The total number of Americans receiving unemployment benefits for the week of May 3 rose by 9,000 to 1.88 million.

— Material from Associated Press used in this report

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