Robert Besser
03 Jun 2025

WASHINGTON, D.C.: A sharp rise in jobless claims and a slump in corporate profits are adding fresh signs of strain in the U.S. economy, as trade uncertainty and rising tariffs weigh on business decisions and labor markets.

New data from the Labor Department this week showed initial jobless claims climbed more than expected last week, while continuing claims hit their highest level in three and a half years. At the same time, first-quarter profits saw a steep decline, with analysts pointing to tariffs and economic unpredictability as key factors.

Michigan led the surge in filings — the country's auto manufacturing hub — with additional increases in Nebraska and California. In total, initial claims rose 14,000 to a seasonally adjusted 240,000 for the week ending May 24. Economists had forecast 230,000.

"This is a sign that cracks are starting to form in the economy and that the outlook is deteriorating," said Christopher Rupkey, chief economist at FWDBONDS. "There is nothing great about today's jobless claims data, and the jump in layoffs may be a harbinger of worse things to come."

Unadjusted claims also ticked up by over 10,000 last week. Meanwhile, the number of people receiving benefits — a proxy for ongoing hiring — rose to 1.919 million, suggesting companies remain cautious about expanding headcount.

The economic backdrop has grown more uncertain following a U.S. trade court ruling that blocked most of Trump's new tariffs. While offering some immediate relief, the decision also raised fresh questions about the future of trade policy and its economic impact.

In minutes released this week, the Federal Reserve acknowledged "considerable uncertainty" in the labor market outlook and warned of possible weakening in the months ahead. Despite steady interest rates, officials are grappling with how tariffs might drive inflation while slowing growth.

A separate report from the Commerce Department showed corporate profits declined by US$118.1 billion in the first quarter, reversing the $204.7 billion gain seen at the end of last year. Companies across sectors — from airlines to automakers — have grown increasingly reluctant to provide 2025 financial guidance due to tariff uncertainty.

With imports surging ahead of expected price hikes, GDP contracted at a 0.2 percent annualized rate last quarter. The same contraction appeared in alternative metrics like gross domestic income and gross domestic output, reinforcing concerns about slowing momentum.

Bank of America report noted rising unemployment among higher-income households, while job loss duration also increased — with the median now at 10.4 weeks. Although mass layoffs haven't yet taken hold, the pressure is mounting.

A Conference Board survey found that while most CEOs do not plan to cut headcount, 83 percent expect a recession within the next 12 to 18 months.