WASHINGTON (Reuters) – First-time applications for U.S. unemployment benefits drifted lower last week, which could allay fears of a material shift in the labor market.

Initial claims for state unemployment benefits dropped 6,000 to a seasonally adjusted 233,000 for the week ended June 22, the Labor Department said on Thursday. The claims data included last Wednesday’s Juneteenth National Independence Day, a new holiday. Claims tend to be volatile around public holidays.

They had risen to the upper end of their 194,000-243,000 range of this year.

Economists are split on whether the recent increase in claims pointed to rising layoffs or the repeat of volatility experienced during the same time last year.

Claims remain at historically low levels and are being closely watched for signs whether employers are laying off more people as the economy slows in response to the 525 basis points worth of interest rate hikes delivered by the Federal Reserve since 2022 to tame inflation.

The government confirmed in a separate report on Thursday that economic growth moderated sharply in the first quarter.

Gross domestic product increased at a slightly upwardly revised 1.4% annualized rate last quarter, the Commerce Department’s Bureau of Economic Analysis said in its third estimate of GDP for the January-March quarter.

Growth was previously estimated at a 1.3% pace. The economy grew at a 3.4% rate in the fourth quarter.

The U.S. central bank has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range since last July.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 18,000 to a seasonally adjusted 1.839 million during the week ending June 15, the claims report showed. The so-called continuing claims data covered the period during which the government surveyed households for June’s unemployment rate.

The jobless rate rose to 4.0% in May for the first time since January 2022. Most economists, however, did not view the rate at the current level as posing a danger to the labor market, arguing that the increase was concentrated among the

35-44 age group, recent immigrants and certain industries.

“Though job growth will slow, it will remain sufficient to limit a significant and broad-based increase in the unemployment rate,” said Ryan Sweet, chief economist at Oxford Economics.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)

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