US jobless claims drop back after New York school break ends

Initial applications for US unemployment benefits fell last week, after seasonal factors caused a significant increase in New York claims in the prior week.

Initial claims decreased by 10,000 to 222,000 in the week ended May 11, according to Labor Department data released Thursday. The median forecast in a Bloomberg survey of economists called for 220,000.

Claims in New York dropped after surging the previous week while New York City public schools were on spring break. Some workers such as bus drivers are allowed to apply for benefits during school breaks, which tends to make weekly data volatile during and after recess.

Continuing claims, a proxy for the number of people receiving unemployment benefits, rose to 1.79 million in the week ended May 4.

Federal Reserve Chair Jerome Powell earlier this week said the labor market was “very strong,” but gradually cooling. Policymakers at the central bank are trying to tame price pressures by weakening demand across the economy and looking for further signs that the labor market is loosening.

“Supply and demand of workers is coming back into a better balance, just as we would want,” Powell said Tuesday during an event hosted by the Foreign Bankers’ Association in Amsterdam.

The four-week moving average, which helps smooth short-term fluctuations in weekly claims figures, increased to 217,750, the highest level since November.

In the 20 years that preceded the Covid-19 pandemic, weekly initial applications averaged about 345,000, and continuing claims roughly 2.9 million.

Separate data released Thursday showed that home construction rose by less than forecast in April and permits for new activity dropped, suggesting the recent rise in mortgage rates gave builders pause.