Jobless claims spike to 263,000 — highest since 2021 — as a Fed rate cut all but locked in

Americans filed 263,000 new unemployment claims last week — up 27,000 from the prior week and the most since October 2021 — in a jarring sign the labor market is losing altitude just before the Federal Reserve meets next week.

Economists had penciled in around 235,000 claims, so the miss was sizable. It’s also the biggest week-to-week jump in almost a year, according to Labor Department data for the week ended Sept. 6.

The burst in claims lands alongside hotter inflation, creating a headache for policymakers. Consumer prices rose 0.4% in August and 2.9% year over year, with core prices up 0.3% on the month and 3.1% annually — a mix that keeps pressure on wallets while the jobs engine sputters.

Markets still see the Fed cutting rates next week — most likely by a quarter point — after Chair Jerome Powell signaled a restart to easing. But fresh CPI heat could slow the pace from there. As LPL Financial’s Jeffrey Roach put it, “the hot inflation print won’t likely change the Fed’s plan to cut in September, but it’s possible the Fed will hold in October if inflation expectations stop looking well-contained.”

The labor signals keep getting noisier

• Initial claims: 263,000 (highest since Oct. 23, 2021)
• 4-week average: up 9,750 to 240,500
• Continuing claims:94 million, unchanged (week ended Aug. 30)

Weekly claims can be choppy around holidays, and Texas posted an outsized increase (unadjusted), which may fade. Still, the broader trend has turned softer. The government’s preliminary benchmark revision showed the US added 911,000 fewer jobs in the year through March 2025 than first reported, with weakness concentrated in leisure & hospitality, professional services, and retail.

August payrolls then rose just 22,000, far below expectations, and job openings slid to 7.2 million at July’s end — the first time since April 2021 that unemployed workers outnumbered posted vacancies. Put plainly: hiring has cooled, and layoffs may be picking up.

Normally, rising unemployment pushes the Fed to cut to support growth. Rising inflation argues the opposite. Right now, the central bank is staring at both: price pressures that haven’t fully let go and a job market that’s lost momentum.

The inflation details point to tariff-sensitive goods (new cars, apparel, some food items) and staples like groceries and gasoline carrying more weight. That’s painful for consumers whose paychecks aren’t stretching as far — real hourly earnings growth slowed to 0.7% in August.

What this means next

• Rate cut next week: Very likely, with officials emphasizing support for employment while stressing they’ll “proceed carefully” if inflation stays sticky.
• Path after September: Data-dependent. If claims keep rising and core inflation eases, the Fed can keep trimming. If price pressures firm up again, cuts could pause as soon as October.
• For workers and businesses: Hiring plans are wobbling; bargaining power is ebbing. Companies facing higher input costs from tariffs and wage bills are becoming more cautious — which shows up first in postings and then in claims.

The economy just sent the Fed a mixed message in bold font — cooling jobs and firmer prices. A September cut looks locked in, but beyond that, the central bank’s glide path will depend on whether this week’s claims jump is a blip… or the start of something bigger.

Bloomberg, Axios, Reuters, and ABC News contributed to this report.