The number of Americans filing new claims for unemployment benefits rose modestly last week, suggesting the labor market remains on solid ground.
Initial claims for state unemployment benefits rose by 5,000 to a seasonally adjusted 219,000 for the week ended Feb. 15, the Labor Department said on Thursday. Economists polled by Reuters had expected 215,000 claims for the latest week.
The White House is looking to cut about 2.3 million federal government jobs, excluding the military and the postal service, which Trump says is too large.
Historically low layoffs have kept the labor market stable, but that could change as workers who rely on federal contracts or funding lose their jobs.
The federal government layoffs, hiring freezes and spending cuts are expected to have ripple effects on local economies, especially in Washington, D.C., and neighboring states like Virginia and Maryland, and could trigger job cuts in the private sector.
States like California and Texas also have large federal worker populations spread across the country.
“A reduction in government hiring could signal budget tightening, leading to a hiring slowdown or layoffs at private companies that rely on federal spending,” said Sung Won Sohn, a professor of finance and economics at Loyola Marymount University.
For now, the demand is in line with a still-healthy labor market and gives the Federal Reserve room to keep interest rates unchanged while policymakers monitor the economic impact of the Trump administration’s fiscal, trade and immigration policies that economists consider inflationary.
Minutes of the U.S. Federal Reserve’s Jan. 28-29 policy meeting released Thursday showed policymakers’ concerns about rising inflation due to Trump’s initial policy proposals.
Fed officials viewed labor market conditions as “strong” and “stable” but “generally stated that labor market indicators should be closely monitored.”
The Fed kept its benchmark interest rate in a range of 4.25%-4.50% last month after cutting it by 100 basis points since September, when it began its easing cycle. The base rate was raised by 5.25 percentage points in 2022 and 2023 to curb inflation.
The claims data covers the period in which the government surveys business establishments for the nonfarm payroll component of the February jobs report. Nonfarm payrolls rose by 143,000 jobs in January, partly hampered by unusually cold temperatures and wildfires in California.
Government employment has been one of the main drivers of job growth over the past year. Economists expect job growth to slow sharply in the second half of the year.
Next week’s data on the number of individuals receiving benefits after the first week of aid, which is a measure of hiring, will provide more guidance on labor market conditions in February.
Continuing claims rose by 24,000 to a seasonally adjusted 1.869 million in the week ended Feb. 8, the claims report said.
