Weekly jobless claims hit 7-month high; imports post record decline

The number of Americans filing new applications for unemployment benefits increased to a seven-month high last week, pointing to softening labour market conditions amid mounting economic headwinds from tariffs.

The report from the labour Department  also continued to show workers losing their jobs having a tough time landing new opportunities as uncertainty caused by President Donald Trump’s aggressive trade policy leaves employers reluctant to increase headcount.

The data included the Memorial Day holiday, which economists said could have caused difficulties with the seasonal adjustment and likely contributed to the second straight weekly increase in unemployment claims. Still, they said the report offered some evidence of labour market strains.

“We won’t dismiss the rise in claims over the last two weeks, which may be signaling weakening labour market conditions in response to the Trump administration’s tariff policies and uncertainty,” said Nancy Vanden Houten, lead US economist at Oxford Economics. “However, seasonal quirks might have contributed to the rise in claims.” Initial claims for state unemployment benefits rose 8,000 to a seasonally adjusted 247,000 for the week ended May 31, the highest level since last October. Economists polled by Reuters had forecast 235,000 claims for the latest week.

With the start of the school holidays this month, claims could remain elevated as some states allow non-teaching staff to collect benefits.

There were notable rises in unadjusted claims in Kentucky and Tennessee, likely related to layoffs in the motor vehicle industry amid duties on imported parts.

Claims surged in the prior week in Michigan, attributed to layoffs in the manufacturing industry. But companies are generally hoarding workers after struggling to find labour during and after the COVID-19 pandemic.

The Federal Reserve’s Beige Book report on Wednesday showed “comments about uncertainty delaying hiring were widespread,” noting that “all districts described lower labour demand, citing declining hours worked and overtime, hiring pauses and staff reduction plans.” It said while some districts reported layoffs in certain sectors, “these layoffs were not pervasive.” Stocks on Wall Street were higher. The dollar was steady against a basket of currencies. US Treasury yields rose.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, slipped 3,000 to a seasonally adjusted 1.904 million during the week ending May 24, the claims report showed.

The elevation in the so-called continuing claims aligns with consumers’ ebbing confidence in the labour market.

SLACKENING labour MARKET The claims data have no bearing on the labour Department’s closely watched employment report for May, scheduled to be released on Friday, as it falls outside the survey period.

Nonfarm payrolls likely increased by 130,000 jobs last month after advancing by 177,000 in April, a Reuters survey of economists showed. The unemployment rate is forecast being unchanged at 4.2%.

“A gradual but genuine slackening of the labour market is underway,” said Oliver Allen, senior US economist at Pantheon Macroeconomics.

There was, however, some welcome news on the economy.

A separate report from the Commerce Department’s Bureau of Economic Analysis showed the trade deficit narrowed sharply in April, with imports decreasing by the most on record as the front-running of goods ahead of tariffs ebbed, which could provide a lift to economic growth this quarter. The trade gap contracted by a record 55.5% to $61.6 billion, the lowest level since September 2023. The goods trade deficit eased by a record 46.2% to $87.4 billion, the lowest level since October 2023.

A rush to beat import duties helped to widen the trade deficit in the first quarter, which accounted for a large part of the 0.2% annualized rate of decline in gross domestic product last quarter. The contraction in the deficit, at face value, suggests that trade could significantly add to GDP this quarter, but much would depend on the state of inventories.

“The collapse in the trade gap, although unlikely to be sustained, points to a massive trade addition to GDP growth and, if the offset to the import swing is not measured in inventories, second-quarter measured GDP growth could be eye-popping, possibly in the area of 5%, but as meaningless as the first-quarter’s decline in output,” said Conrad DeQuadros, senior economic advisor at Brean Capital.

Imports decreased by a record 16.3% to $351.0 billion in April. Goods imports slumped by a record 19.9% to $277.9 billion, held down by a $33.0 billion decline in consumer goods, mostly pharmaceutical preparations from Ireland.

Agencies