US Unemployment Claims Hit 8-Month High; Is Recession in Sight?

The US labor market, one of the pillars of its economy, is showing signs of strain. During the week ending June 7, new unemployment claims remained unchanged at 248,000, matching the previous week's figure, which was already the highest level since early October. This stagnation at the high end of recent ranges, for the third consecutive week, has raised alarm among analysts, who fear that layoffs may be on the rise.

Weekly unemployment benefit applications are considered a barometer of layoffs in the country. Since the crisis caused by the COVID-19 pandemic five years ago, these figures had largely remained within a historically healthy range, fluctuating between 200,000 and 250,000. However, the persistence at the high end of this range over the past three weeks suggests a possible turning point. Analysts had forecast 244,000 new applications, so the current figure slightly exceeded expectations.

Heather Long, chief economist at Navy Federal Credit Union, expressed concern: "There are early warning signs in the labor market." Long warned that if layoffs continue to worsen through the summer, it could increase fears of a recession and a contraction in consumer spending, a key driver of the U.S. economy.

The four-week average of unemployment claims, a measure that smooths out weekly fluctuations, also increased by 5,000, reaching 240,250. Even more telling is the total number of Americans receiving unemployment benefits, which for the week ending May 31 jumped by 54,000, reaching 1.96 million, the highest number since November 2021.

One of the main causes of this job uncertainty appears to be the lingering impact of trade wars. Many companies, when reporting their latest financial results, have cut their sales and profit expectations for 2025 or have refrained from issuing forecasts, often citing President Donald Trump's erratic display of tariff announcements. Although Trump has paused or reduced some of his tariff threats, concerns remain that a tariff-induced global economic slowdown could sabotage the strength of the US labor market.

"There are early warning signs in the labor market," said Heather Long, chief economist at Navy Federal Credit Union, reflecting the growing concern among experts.

Federal Reserve Chairman Jerome Powell has noted that the potential for both unemployment and inflation to rise is high, an unusual combination that complicates the central bank's dual mandate of controlling prices and keeping unemployment low. Powell has indicated that tariffs have dented consumer and business confidence. In early May, the Federal Reserve held its benchmark interest rate at 4.3% for the third consecutive meeting, after having cut it three times late last year. Wall Street expects the central bank to hold rates steady at its June meeting, although traders predict it will need to cut rates later this year to prop up the economy.

Despite these warning signs, other data paint a mixed picture. Last week, the Department of Labor reported that US employers slowed their hiring in May, but still added a solid 139,000 jobs. This report was well received on Wall Street, contributing to gains in the stock markets.

However, another report from the Department of Labor revealed that while U.S. job openings unexpectedly increased in April, other data suggests Americans are less optimistic about the labor market. The number of people quitting their jobs—a sign of confidence in their prospects—declined, while layoffs increased. Furthermore, in a sign that the labor market has cooled since the hiring boom of 2021-2023, the government reported that there is one job opening for every unemployed person, a notable difference from December 2022, when there were two openings for every jobless American.

The US economy, according to government estimates, contracted at an annual rate of 0.2% in the first quarter of 2025, a slight improvement from the first estimate. This growth was slowed by a surge in imports, as companies sought to acquire foreign goods before Trump's massive tariffs went into effect.

Companies like Google have recently confirmed they are offering layoffs to some of their employees as a cost-cutting measure. These announcements add to the job cuts already announced by other large corporations throughout the year.

The evolution of unemployment claims in the coming weeks will be crucial in determining whether these warning signs become a consolidated trend that could drag the US economy into a more pronounced slowdown.