WASHINGTON (Reuters) – The number of Americans filing new applications for unemployment benefits increased moderately last week, suggesting that the labor market remained on solid ground.
Initial claims for state unemployment benefits rose 5,000 to a seasonally adjusted 219,000 for the week ended February 15, the Labor Department said on Thursday. Economists polled by Reuters had forecast 215,000 claims for the latest week.
Federal employees, thousands of whom have been fired in recent days by billionaire Elon Musk’s Department of Government Efficiency, or DOGE – an entity created by Republican President Donald Trump – are not included in the state claims data.
Their claims are filed separately under the unemployment compensation for federal employees (UCFE) program, and the data is reported with a one week lag.
The White House wants to slash the roughly 2.3 million federal government workforce, which excludes the military and post office, that Trump says is too bloated.
Historically low layoffs are keeping the labor market on solid footing, but that could change as workers dependent on federal government contracts or funding lose their jobs.
Federal government layoffs, hiring freezes and spending cuts are expected to have ripple effects on local economies, especially in Washington D.C. and the adjacent states of Virginia and Maryland, and trigger private sector job cuts.
States like California and Texas also have a large presence of federal workers, who are also spread around the country.
“Reduced government hiring could signal budget tightening, leading to slower hiring or layoffs in private companies that depend on federal spending,” Sung Won Sohn, Finance and Economics professor at Loyola Marymount University.
For now, claims are consistent with a fairly healthy labor market and give the Federal Reserve room to keep interest rates unchanged as policymakers monitor the economic impact of the Trump administration’s fiscal, trade and immigration policies, deemed inflationary by economists.
Minutes of the U.S. central bank’s January 28-29 policy meeting published on Wednesday showed policymakers worried about higher inflation from Trump’s initial policy proposals.
Fed officials viewed labor market conditions as “solid” and “stable” but “generally noted that labor market indicators merited close monitoring.”
The Fed left its benchmark overnight interest rate unchanged in the 4.25%-4.50% range last month, having reduced it by 100 basis points since September, when it embarked on its policy easing cycle. The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation.
The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of February’s employment report. Nonfarm payrolls increased by 143,000 jobs in January, partly held back by unseasonably cold temperatures and wildfires in California.
Government employment has been one of the top drivers of employment growth over the last year. Economists expect a sharp slowdown in job growth in the second half of the year.
Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will offer more clues on the state of the labor market in February.
Continuing claims increased 24,000 to a seasonally adjusted 1.869 million during the week ending February 8, the claims report showed.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
