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The number of Americans filing new claims for unemployment benefits surged to the highest level in more than 1-1/2 years last week, but most economists were not convinced that layoffs were accelerating, noting that the data can be very volatile. The largest increase in applications in nearly two years reported by the Labor Department on Thursday, was driven by outsized rises in Ohio and California. The data also included last week's Memorial Day holiday. Claims tend to be volatile around public holidays. "The jump in claims could be a sign of a pickup in layoffs but, given the volatility of claims from week-to-week, it is too soon to reach that conclusion," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. "The narrowness of the increase in claims by state is a further factor suggesting we should wait for additional confirmation before concluding layoffs have picked up, especially given the fraud in Massachusetts recently. Initial claims for state unemployment benefits jumped 28,000 to a seasonally adjusted 261,000 for the week ended June 3, the highest level since October 2021. Economists polled by Reuters had forecast 235,000 claims for the latest week. Unadjusted claims increased only 10,535 to 219,391 last week, with applications in Ohio surging 6,345 and filings in California shooting up 5,173. The four-week moving average of claims, considered a better measure of labor market trends as it strips out week-to-week volatility, rose 7,500 to 237,250. The labor market is only slowing gradually. The government reported last week that the economy added 339,000 in May. Although the unemployment rate increased to a seven-month high of 3.7% from 3.4% in April, it remains low by historical standards. Job growth is being driven by the services sector, including the leisure and hospitality category, which is still catching up after businesses struggled to find workers over the last two years. Industries like healthcare and education also experienced accelerated retirements during the COVID-19 pandemic. For some economists, however, the jump in claims was another sign of cracks forming in the labor market as the economy feels the full impact of the 500 basis points worth of interest rate increases from the Federal Reserve since March 2022. They believed that layoffs were spreading from the technology sector and the interest rate-sensitive industries like housing, finance and manufacturing, which made headlines last year and early this year, to other segments of the economy. "Headline-grabbing layoff announcements, however, typically take some time to be put into effect," said Stuart Hoffman, a senior economic advisor at PNC Financial in Pittsburgh, Pennsylvania. "This delay accounts for the recent rise in initial claims. This effect could also portend another escalation in the months to come, alongside the ever-widening net of jobs cuts spreading across industries." The Institute for Supply Management (ISM) reported on Monday that its services PMI dropped in May, attributed mostly to weakness in employment. According to the ISM, comments from services businesses ranged from "we are trying to do more with the same staff," to being "on a hiring freeze until there's a better understanding of where the economy is headed." The ISM reported last week that its manufacturing PMI was stuck below the 50 threshold in May for the seventh straight month, the longest such stretch since the Great Recession.<br><br> The number of people receiving benefits after an initial week of aid, a proxy for hiring, fell 37,000 to 1.757 million during the week ending May 27, the claims report showed. The low level of the so-called continuing claims suggests some laid off workers are still finding work easily, with 1.8 job openings for every unemployed person in April.