Key Points

  • The increase in continuing jobless claims exceeded expectations, reaching the highest level since November 2021, with both hiring and layoffs slowing, indicating a cooling labor market.
  • Data released by the U.S. Department of Labor on Thursday showed that continuing jobless claims rose by 37,000 to 1.97 million in the week ending June 14.
  • Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, said: "The rise in continuing claims points to a higher unemployment rate in June." He noted in a client report, "With no reason to expect a sudden improvement in corporate hiring plans, we maintain our forecast that the unemployment rate will rise to 4.8% by December."

In-Depth Analysis

Following the Federal Reserve officials' meeting on June 17-18, two policymakers have warned of potential weakness in the labor market and indicated they may support a 25-basis-point cut to the main interest rate at their regular meeting on July 29-30. Both noted that inflation has cooled.

The median projection released by Fed officials after their latest meeting shows the unemployment rate rising to 4.5% by the end of the year from 4.2% in May, 0.1 percentage point higher than the March forecast.

Since the meeting, policymakers have expressed differing views on the labor market outlook.

"If inflation pressures remain contained, I would support moving policy rates closer to neutral as soon as the next meeting to maintain a healthy labor market," said Michelle Bowman, the Fed's vice chair for supervision, on Monday. Fed Governor Christopher Waller expressed a similar stance on June 20.

Fed Chair Jerome Powell and other central bank officials have shown greater confidence in the resilience of the labor market than their two colleagues.

"Employment conditions remain solid," Powell testified before the Senate Banking Committee on Wednesday. He noted that nonfarm payroll growth averaged a "moderate 124,000" per month in the first five months of 2025, with the unemployment rate still at historically low levels.

There are signs that layoffs may be decreasing. Labor Department data showed that initial jobless claims fell to 236,000 in the week ending June 21, a larger-than-expected decline from 246,000 the previous week.

Similar to Powell, San Francisco Fed President Mary Daly described the labor market as "solid."

She said the Labor Department data released Thursday "confirms that continuing claims are rising because it takes longer to find a job—consistent with slowing hiring data, indicating the economy is moving toward a more sustainable pace of growth."

In an interview with Bloomberg Television, she said the job market "is steadily developing, albeit at a slower pace than before."

Similarly, Richmond Fed President Tom Barkin noted on Thursday that "job growth continues at a healthy pace."

However, Barkin said in a speech that "if tariff-induced inflation erodes corporate profit margins and prompts companies to cut costs through layoffs in the coming months, the current environment of low hiring and low layoffs could face threats."