The American labor market continued to show signs of softening last week, with unemployment claims climbing and more workers collecting benefits as hiring remains sluggish, according to estimates from major Wall Street economists released Thursday.
In an unusual display of makeshift economic reporting necessitated by an ongoing government shutdown, analysts from leading financial institutions pieced together their own calculations of jobless claims after official data releases ceased three weeks ago.
Claims Tick Higher as Data Blackout Continues
Initial unemployment claims rose to approximately 232,000 for the week ending October 18, up from 220,000 the previous week, according to calculations by economists at Citigroup and Nationwide. Goldman Sachs pegged the figure at 227,000, while JPMorgan estimated 229,000 claims.
The range of estimates reflects the makeshift nature of current labor market tracking. With the Labor Department shuttered, economists have been forced to collect raw, unadjusted data directly from state agencies and apply seasonal adjustment factors the government published earlier this year—essentially doing the government’s job themselves.
The task became more complicated last week when data from three states—Tennessee, Massachusetts, and Colorado—was unavailable, forcing economists to make educated guesses about those figures, mirroring procedures the Labor Department typically employs in similar situations.
“The latest state-level jobless claims data suggests the labor market remains steady and that layoffs remain low,” said Oren Klachkin, financial market economist at Nationwide. “Overall, initial claims remain subdued and aren’t flagging an imminent economic downturn.”
Trade Policy Takes Toll on Hiring
The modest uptick in claims comes amid mounting evidence that the labor market has lost momentum in recent months, a trend that predates the current government shutdown. Economists have increasingly pointed to lackluster hiring as the primary concern, with many attributing the slowdown to the Trump administration’s trade policies, which have created uncertainty for businesses.
While the estimated claims figures have remained within their typical range, suggesting layoffs haven’t accelerated dramatically, the real concern lies in what’s happening on the hiring side of the equation.
The number of Americans collecting unemployment benefits beyond their initial week of aid—a key indicator of how difficult it is for jobless workers to find new positions—climbed to approximately 1.942 million for the week ending October 11, up from 1.928 million the prior week, according to Citigroup’s calculations. Estimates from other major banks fell within a similar range.
“This likely reflects the low hiring environment, as typically hiring would pick up in October for the holiday season,” said Gisela Young, an economist at Citigroup. “Some indications suggest holiday hiring may be less than usual this year.”
The rising continuing claims are particularly concerning given the time of year. October typically sees businesses ramping up seasonal hiring ahead of the holiday shopping season, but the current data suggests that the traditional pattern may be breaking down.
Federal Workers Add Complication
Adding another layer of complexity to the labor market picture, applications from federal employees have surged in recent weeks, likely connected to the more than 150,000 government workers who left payrolls at the end of September after accepting buyout packages.
Additionally, furloughed federal employees affected by the shutdown can file for unemployment benefits, though they would be required to reimburse the program once they receive back pay after the government reopens. These claims are tracked under a separate program, and the latest figures were not immediately available.
Implications for Policy and Data Quality
The timing of the claims data is particularly significant, as it covers the survey period the government would normally use to compile the nonfarm payrolls component of October’s employment report—data that won’t be released on schedule due to the shutdown.
Interestingly, some economists see a potential silver lining in the delay. The extended timeline could improve response rates to the Labor Department’s employer survey, which has been plagued by low participation in recent months. Poor response rates have been blamed for unusually large revisions to payroll figures, undermining confidence in the government’s headline employment numbers.
“Economists did not view the shutdown as negatively impacting the quality of October’s payroll count,” the analysis noted, though the delayed release will leave policymakers and markets flying blind on labor market conditions for longer than usual.
Fed Rate Cut Expected
Against this backdrop of labor market cooling, the Federal Reserve is widely expected to cut interest rates again at its meeting next week, a move aimed at supporting employment as economic conditions soften.
The unemployment rate climbed to nearly a four-year high of 4.3% in August, underscoring the challenges facing American workers. While that figure remains relatively low by historical standards, the upward trajectory has caught the attention of Fed officials who have pivoted from their previous focus on inflation to concerns about preserving labor market strength.
The combination of rising jobless claims, elevated continuing claims, sluggish hiring, and mounting trade policy concerns paints a picture of a labor market that, while not in crisis, has clearly lost the robust momentum it enjoyed through much of the post-pandemic recovery. For policymakers and workers alike, the question now is whether this represents a temporary soft patch or the beginning of a more significant slowdown.
WHAT YOU SHOULD KNOW
The U.S. labor market is cooling, but not collapsing. Jobless claims rose modestly to around 232,000 last week, while more Americans are staying on unemployment longer—a clear sign that hiring has slowed significantly, not that layoffs are spiking.
Economists blame the Trump administration’s trade policies for creating business uncertainty that’s dampening hiring. Most concerning: this slowdown is hitting during October, when companies typically ramp up holiday season hiring, suggesting weaker consumer demand ahead.
