U.S. jobless claims drop by most since 2021

Filings fall by 26,000 as demand for work has been easing slowly

U.S. unemployment benefits applications fell last week by the most since October 2021 in a week that included the Juneteenth holiday.

Initial jobless claims decreased by 26,000 to 239,000 in the week ended June 24, according to the Labor Department's Thursday report. The figure was lower than all estimates in a Bloomberg survey of economists.

Continuing claims, which include those who have received unemployment benefits for more than one week, dropped to 1.7 million for the week ended June 17.

Despite the drop in claims, demand for workers has been easing slowly as more than a year's worth of interest-rate hikes from the Federal Reserve work their way through the economy. Chair Jerome Powell said this week the labor market has been cooling in a way the central bank would have hoped, which, if sustained, could limit job losses down the line.

The claims data can be choppy from week to week, especially around holidays, and this period included the Juneteenth holiday. The four-week moving average in initial claims, which smooths out some of that volatility, ticked up to 257,500, still the highest since late 2021.

The data may also be especially noisy in the coming weeks with the Fourth of July holiday and as automakers close for their annual retooling period. However, the seasonal adjustments to the claims data “struggle with the shifting timing, extent, and duration” of the shutdowns, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

“Our inclination is to think that post-Covid catch-up in production means that shutdowns are likely to be less extensive than usual, so we think a modest net dip in claims over the next few weeks is a reasonable bet, even as the underlying trend continues to rise,” Shepherdson said in a note.

On an unadjusted basis, claims decreased to 233,048, led by California, which reversed a large jump from the prior period. Texas also saw a significant drop in applications.

A separate report Thursday showed US first-quarter gross domestic product was revised up significantly to a 2% annualized advance, according to the Bureau of Economic Analysis' third estimate of the figure. The stronger print reflected upward adjustments to exports and consumer spending.

Consumer spending, the engine of the US economy, rose at an annualized 4.2%, the strongest pace in nearly two years.