An estimated 210,000 Americans filed first-time unemployment claims last week. This is a slight dip from the previous week, but claims remain near a four-month high. Ongoing claims rose unexpectedly from 1.315 million to 1.346 million.
Unemployment claims were down by 8,000 for the week ending May 21. The week prior, initial claims were at their highest since January. In California, jobless claims were down by more than 5,000. In Illinois, claims were down by just over 4,000, and in Kentucky, jobless claims were down by 3,564.
Bank of America (BoA) released a report last Wednesday and commented on the newest unemployment stats.
BoA strategists claimed the rise in jobless claims may not be all bad news: for inflation to lessen, there must be a slowing of job growth accompanied by an increase in the unemployment rate.
“Bad news equals good news when the labor market cracks,” the strategists wrote in the report. “The S&P 500 typically bottoms three months before claims peak.”
BoA notes as the unemployment rate goes down, it is more difficult for the Fed to slow inflation without triggering a recession. Zerohedge economists claim that would be bad for the overall economy, especially for less advantaged parts of the population.
A recession is defined as two consecutive quarters with a dip in GDP. The St. Louis Fed says there was a 1.5% drop in GDP in the first quarter of 2022.
The Fed also cites an uncertain outlook as one reason the stock market has fallen in recent weeks. During the first quarter, corporate profits fell across the board.
Reuters reports that economists believe this signals a combination of eroding profits and dipping stock prices, which could eventually lead to hiring freezes or employee layoffs.
Walmart officially lowered its full-year earnings predictions, citing high inflation as the impetus for the change, Bloomberg reported.
Snapchat is among many major tech companies that suffered stock share price losses, CNBC reported. Its parent company, Snap, announced a profit warning earlier in the week that triggered a major sell-off of social media stock.
Christopher Rupkey, the chief economist at FWDBONDS, explained, “The biggest expense of most companies is labor. High-flying tech companies have seen their share prices plummet, which will force management to tighten their belts.”
Just two weeks ago, Netflix announced it had laid off at least 150 workers in the United States.
A Commerce Department report shared by Reuters showed corporate profits fell 2.3% in the first quarter. This represents a loss in corporate profits totaling $66.4 billion and the company’s first drop in two years.