Global Courant 2023-05-18 19:22:15
Fewer Americans filed for unemployment benefits last week after an earlier spike that many analysts took as a sign that higher interest rates were finally cooling the job market.
As it turns out, the recent surge in claims for unemployment benefits was largely due to fraudulent claims in Massachusetts, where claims fell by more than 14,000 this week from the previous week, analysts said.
U.S. jobless claims for the week ended May 6 fell 22,000 to 242,000, from 264,000 the week before, the Labor Department reported Thursday. The weekly claims numbers are broadly as representative of the number of layoffs in the US.
While news of Massachusetts’ fraudulent numbers made hand-wringing over last week’s jump in claims seem overdone, economists still expect a slow rise in layoffs in the second half of 2023.
“We expect jobless claims to resume their upward trend as the economy weakens and moves into a mild recession in the second half of the year, and as layoffs become more common,” wrote Nancy Vanden Houten, an economist at Oxford Economics.
The four-week moving average of claims, which smooths out some of the week-over-week swings, fell 1,000 to 244,250. Analysts point to a continued rise in four-week averages as a sign that layoffs are on the rise, but are reluctant to predict that a spike in layoffs is imminent.
A total of 1.8 million people received unemployment benefits in the week ending April 29, about 8,000 fewer than the week before.
Since the pandemic purge of millions of jobs three years ago, the US economy has added jobs at a breakneck pace and Americans have enjoyed unusual job security. This despite rising interest rates for more than a year and fears of an imminent recession.
Early this month, the Fed raised its benchmark lending rate for the 10th consecutive time in its bid to cool the economy and curb four-decade high inflation. While the labor market still favors workers, there are some recent indications that the Fed’s policy actions are working.
In April, the US added 253,000 jobs and the unemployment rate fell to 3.4%, the lowest level in 54 years. But the numbers for February and March were revised down by 149,000 jobs, possibly signaling that the Fed’s rate policy strategy is beginning to cool the labor market.
The government also recently reported that the number of job openings in the US fell to the lowest level in nearly two years in March.
The Fed is hoping for a so-called soft landing: cutting growth just enough to control inflation without triggering a recession. Economists are skeptical and many expect the US to slip into recession later this year.
Last month, the US Department of Commerce reported that the US economy slowed sharply from January through March, slowing to just 1.1% year on year as higher interest rates hit the housing market and companies reduced inventories.
There have been an increasing number of high-profile layoffs recently, particularly in the technology sector, where companies have been adding jobs at a breakneck pace during the pandemic. IBM, Microsoft, Salesforce, Twitter, Lyft, LinkedIn and DoorDash have all announced layoffs in recent months. Amazon and Facebook have each cut two jobs since November.
But it’s not just the tech sector that’s cutting off staff. McDonald’s, Morgan Stanley and 3M also recently announced layoffs.
