As the U.S. demand for labor cools, companies have laid off employees to remain profitable, with a report showing that the number of job cuts jumped 57% month-over-month in June. This brought the number of Americans filing initial jobless claims last week to a six-month high, suggesting demand for labor is cooling.
Initial filings for state unemployment benefits increased by 4,000 to a seasonally adjusted 235,000 for the week ended July 2, the Labor Department said in a July 7 report, the highest level of initial claims since mid-January.
However, with unemployment at 3.6% and the labor market exceptionally tight, companies are unlikely to make deep cuts in staff unless the economy slips into a recession and sales dry up. While the numbers suggest some clouding of the job market, some analysts said they’re not yet ringing recession bells.
“Jobless Claims continue to weaken, but realistically they’re back to 2018/2019 levels and aren’t suggesting #recession,” Richard Bernstein Advisors said in a post on Twitter.
The number of people already collecting unemployment benefits rose by 51,000 to 1.375 million. Continuing unemployment claims run a week behind the initial filings and reflect the total number of people receiving benefits through traditional state programs.
“The labor market seems to be in a state of flux,” Peter C. Earle, a research fellow at the American Institute for Economic Research, an academic think tank, said in a research note.
“The decisions of the Federal Reserve over the next six months will determine whether there is a gentle slope or a cliff ahead for economic growth and employment over the rest of 2022 and 2023,” he said.
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Most of the increase in raw or actual jobless claims was concentrated in just a handful of states: New York, Michigan, California, and Georgia. The rise in Michigan is likely tied to temporary furloughs among automakers.
Most other states saw little change. Of the 53 states and U.S. territories that report jobless claims, 29 showed a decline, and 24 reported an increase.
“While claims are now at a six-month high, we do not think it is cause for concern just yet,” said money market economist Thomas Simons of Jefferies. “Claims are going to be very important to monitor over the coming weeks and months for signs that labor market conditions are taking a turn for the worse.”
