Quick overview

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Despite better-than-expected data on initial jobless claims, signs are emerging that laid-off workers are struggling to reenter the labor market.

Initial claims for state unemployment benefits in the U.S. fell by 10,000 to a seasonally adjusted 236,000 in the week ending June 21, according to the Department of Labor. Economists had expected 245,000 claims. The latest figures include the effect of a national holiday, and jobless claims tend to be more volatile around such periods.

Technical factors, along with the start of the summer school break, have contributed to the recent rise in claims, placing them at the upper end of the 205,000–250,000 range seen this year. In some states, non-teaching school staff are allowed to claim benefits during summer recess.

Hiring Slowdown Hits Laid-Off Workers

While layoffs remain historically low, job cuts have recently ticked up, and economists say President Donald Trump’s broad import tariffs are making business planning more difficult.

At the same time, hiring has been lackluster, making it harder for unemployed individuals to find new jobs.

The number of people receiving benefits after an initial week of aid—known as continuing claims and considered a proxy for hiring—rose by 37,000 to a seasonally adjusted 1.974 million in the week ending June 14, the highest level since November 2021.

These continuing claims correspond to the same week the Trump administration conducted its household employment survey used to calculate June’s unemployment rate.

As a result of elevated continuing claims, several economists now expect the unemployment rate to rise to 4.3% in June, up from 4.2% in May.

Fed Stays Cautious Amid Uncertainty

The Federal Reserve has responded to the mixed economic signals by pausing its interest rate cut cycle. Fed Chair Jerome Powell told lawmakers this week that the central bank needs more time to assess whether the tariffs are contributing to inflation before considering a reduction in borrowing costs.

Last week, the Fed kept its benchmark interest rate steady at 4.25%–4.50%, where it has remained since December.