Due to the burden of high interest rates, the number of Americans applying for unemployment benefits surged to its highest level in ten months last week, suggesting that the labor market is probably cooling.
Due to the burden of high interest rates, the number of Americans applying for unemployment benefits surged to its highest point in ten months last week, suggesting that the labor market is probably cooling.
According to Labor Department data released on Thursday, the number of applications for unemployment benefits increased by 13,000 to 242,000 for the week ending June 8 from 229,000 the week prior. That is the highest number of new claims since August of 2023 and much higher than the 225,000 new claims analysts had predicted.
In order to mitigate some of the volatility from week to week, the four-week average of claims increased to 227,000. Though still lower than the average from a year ago, that represents a 4,750 gain over the previous week and the highest level since September.
Weekly jobless claims are thought to be a good indicator of the direction of the labor market and a proxy for the quantity of layoffs that occur in the United States in a given week. After the COVID-19 pandemic struck the United States in the spring of 2020 and millions of jobs disappeared, they have stayed at historically low levels.
Lead U.S. economist at Oxford Economics Nancy Vanden Houten said, “While layoffs remain low, an increase in claims may indicate that those losing their jobs are filing for benefits because they are finding it more difficult to get new jobs.” “That would be consistent with fewer workers quitting their jobs and a slower pace of hiring.”
Even while the number for this week appears to be high, it still falls within a range that indicates a robust job market. Nonetheless, prolonged layoffs of this magnitude might sway Federal Reserve officials, who closely monitor the labor market when making interest rate decisions.
Beginning in March 2022, the Federal Reserve hiked its benchmark borrowing rate eleven times in an effort to quell the four-decade high inflation that had developed following the economy’s recovery from the COVID-19 recession of 2020. The goal of the Fed was to curb wage increases, which can lead to inflation, and calm down an already heated labor market.
Strong consumer demand and a stronger-than-expected labor market have prevented a recession, despite the expectations of many economists that the quick rate hikes would do so.
The Federal Reserve maintained its benchmark lending rate at a 23-year high later that day, despite a data released on Wednesday suggesting that consumer inflation somewhat decreased last month. Fed Chair Jerome Powell stated that additional proof that price increases are heading toward the bank’s 2% target is required by officials at the US central bank.
Employers in America created a robust 272,000 new jobs in May, up from April. This increase shows that businesses are still optimistic enough about the economy to continue hiring even in the face of consistently high interest rates.
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However, the government’s report from last week had some indications of a possible downturn. After remaining below 4% for 27 months, the unemployment rate increased for the second consecutive month to a still-low 4%. That run of consecutive victories had matched the longest since the late 1960s.
Additionally, the government just revealed that April saw the lowest number of job postings since 2021, with 8.1 million positions available.
Even if layoffs are still uncommon, a number of well-known businesses have recently announced more employment losses, primarily in the media and technology sectors. Apple, eBay, and Alphabet, the parent company of Google, have all lately announced layoffs.
Aside from technology and media, recent job layoffs have been revealed by Tesla, Peloton, Stellantis, Nike, Walmart, and Nike.
During the week ending June 1, 1.82 million people received unemployment benefits overall, which is a 30,000 rise and the highest number since the beginning of the year.