Unemployment claims rose last week. What does that tell us about the economy?

First-time unemployment claims rose more than expected last week, with 242,000 people filing. That’s 22,000 more than the week before. 

These weekly numbers are notoriously volatile. On their own, there’s only so much they can tell us about what’s happening in the labor market. But taken in context, with everything else that’s happening right now in this economy, they do tell us something. 

The labor market started off this year strong, with a low unemployment rate of 4%.

“And it had been at or below 4.2% for 39 months. The last time unemployment was that low for that long was in the 1960s,” said Heidi Shierholz, president of the Economic Policy Institute.

She said as of this January, the whole economy was strong. And on its own, this week’s bump in unemployment claims isn’t really something to worry about.

“But many data sources are now starting to flash yellow, some are even starting to flash red,” she said. “Stock markets are down, bonds are down, consumer sentiment is down, inflation expectations are way up. All of those are going in the wrong direction.”

And looking at the bump in weekly unemployment claims in that context does give her pause.

Andrew Stettner, too: “The butterflies are there,” he said.

Stettner is the director of economy and jobs at The Century Foundation. He said the labor market has been key to the economy’s recent strength.

“So we’re really looking closely to see if there’s any signs of weakness,” he said.

Hiring has slowed — that’s been showing up in recent data. But are more people losing their jobs?

“Right now the big assault on the labor market are these unprecedented federal layoffs,” Stettner said.

But most federal employees who’ve lost their jobs recently are not counted in this weekly jobless claims number.

“The fact that we’re seeing unemployment claims start to go up, even before we feel the impact of the federal layoffs, that’s a big concern for me,” he said.

In general, the labor market still looks solid overall, said Gregory Daco, chief economist at EY. But all the policy uncertainty in Washington right now is a real concern.

“If business leaders start to adopt a wait-and-see approach, given all the unknowns regarding immigration policy, regarding trade policy, regarding tax policy, that will weigh on the labor market,” he said.

And ripple through to consumer spending, too.