The number of Americans filing claims for unemployment benefits increased more than expected last week, touching their highest level in four months, but the underlying trend remained consistent with a stable labour market.
Initial jobless claims in the US rose marginally by +13K to 225K in the final week of May-26 (previous week: 212K), above market expectations of 212K. This marked the highest reading since the first week of Feb-26. Meanwhile, continuing claims fell by -8K to 1.78m (previous week: 1.79m). While the figure rose from last quarter’s lows, it remained within the two-year average, extending a period of relative stability in the US labour market.
In a separate data release, US nonfarm labour productivity rose by +2.8%yoy in 1QCY26, down from the +2.9%qoq preliminary estimate. Nonetheless, the reading marked the highest annual gain since 3QCY24, reflecting an increase in output of +3.2%yoy and a +0.4%yoy rise in hours worked.
Forward-looking sentiment remained subdued. The ISM Services PMI during the month showed employment contracting for a third consecutive month (falling to 47.9 from 48), with respondents frequently noting that companies had instituted hiring freezes or left vacated positions unfilled. Meanwhile, the S&P Global US Composite PMI Employment index declined at its fastest pace in six years, further signalling a weakening labour market.
Despite high-profile tech layoffs tied to artificial intelligence, overall job cuts remain low by historical standards. While inflationary pressures triggered by the Middle East tensions cloud the outlook, current data still signals labour market stability. MBSB in its report stated that this resilience allows the Fed to keep its focus towards containing inflation, with market expectations pricing in the central bank to potentially hike its benchmark interest rate by +25bps to 3.75–4.00% in Dec-26.
