| Key Points: – Initial unemployment claims jumped 22,000 to 242,000, exceeding economists’ forecast of 221,000 – Federal worker layoffs from Trump’s DOGE initiative haven’t yet appeared in federal unemployment data – Consumer confidence in job availability declining despite historically low overall layoff rates |
The number of Americans filing new applications for unemployment benefits jumped more than anticipated last week, according to the latest data released by the Labor Department. Initial claims for state unemployment benefits increased by 22,000 to a seasonally adjusted 242,000 for the week ended February 22, significantly exceeding economists’ projections of 221,000 claims.
Despite this unexpected rise, experts caution that the increase may not indicate a fundamental shift in labor market conditions. The Labor Department noted that seasonal adjustment factors—the models used to strip out normal fluctuations from the data—tend to artificially inflate claims figures around this time of year.
The report comes amid growing concerns about potential economic impacts from the Trump administration’s recent policies, particularly the mass layoffs of probationary federal government workers. Many of these employees were terminated around February 14 by the Department of Government Efficiency (DOGE), an entity created by President Trump and led by billionaire Elon Musk.
“These firings likely add up to the biggest layoff in the history of the United States,” said Michele Evermore, a Senior Fellow at the National Academy of Social Insurance and former deputy director for policy in the Labor Department’s Office of Unemployment Insurance Modernization. Evermore warned that “economic pain is contagious” and that federal layoffs could trigger broader economic hardship.
Interestingly, the report showed no immediate impact from these federal workforce reductions in the separate unemployment compensation for federal employees program, which is reported with a one-week lag. However, economists warn that the reduction in money flowing through the economy from lost paychecks and spending cuts could eventually lead to private-sector job losses.
The so-called continuing claims—representing people receiving benefits after an initial week of aid—actually fell by 5,000 to a seasonally adjusted 1.862 million during the week ending February 15. This figure is used when surveying households for February’s unemployment rate, which stood at 4.0% in January.
Despite the overall resilience of the labor market, there are signs that households are growing more anxious about their job prospects. A Conference Board survey published Tuesday revealed that the share of consumers who viewed jobs as “plentiful” dropped to a five-month low in February, while the proportion describing jobs as “hard to get” reached its highest level since October.
For the Federal Reserve, these labor market signals provide critical input as policymakers monitor the economic impacts of the administration’s fiscal, trade, and immigration policies—many of which economists view as potentially inflationary. Minutes from the Fed’s January meeting showed policymakers expressing concern about higher inflation resulting from Trump’s initial policy proposals.
The central bank has maintained its benchmark overnight interest rate in the 4.25%-4.50% range after reducing it by 100 basis points since September 2024. This followed an aggressive tightening cycle that raised rates by 5.25 percentage points in 2022 and 2023 to combat inflation.
For now, historically low layoffs continue to support economic expansion, though upcoming reports will be closely watched for any signs that the federal workforce reductions are beginning to impact broader employment trends.