The number of Americans filing for unemployment benefits last week jumped to the highest level since 2021, the latest sign the historically tight labor market is cooling off in the face of rising interest rates.

Figures released Thursday by the Labor Department show initial claims for the week ended May 6 surged by 22,000 to 264,000, well above the 2019 pre-pandemic average of 218,000 claims. It marks the steepest level for jobless claims since October 2021. 

Continuing claims, filed by Americans who are consecutively receiving unemployment benefits, rose slightly to 1.81 million for the week ended April 29, an increase of 12,000 from the previous week. 

MAJORITY OF WORKERS REGRET QUITTING DURING 'GREAT RESIGNATION'

For months, the labor market remained a strong point in the slowing economy, despite an aggressive interest-rate hike campaign by the Federal Reserve.

But there are signs it is beginning to cool. 

Layoffs are on the rise and job openings are declining. Although hiring rose faster than expected in April, jobless claims are also steadily ticking higher. Economists widely expect unemployment to climb higher as a result of steeper interest rates, which could force consumers and businesses to pull back on spending.

PRIVATE SECTOR JOB GROWTH UNEXPECTEDLY JUMPS IN APRIL TO 296,000

The most recent projections from the Fed show that officials expect unemployment to rise to 4.6% by the end of next year, up from the current rate of 3.5%.

That could mean more than 1 million Americans lose their jobs between now and the end of the year.

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Policymakers approved the 10th straight rate increase last week, lifting the federal funds rate to the highest level since August 2007. However, they also opened the door to a pause in tightening at the next meeting, although Chair Jerome Powell stressed the importance of upcoming economic data releases.