Topline
New weekly jobless claims rose to the highest level of the year last week despite projections they would remain near historically low levels—signaling more waves of layoffs could be on the way as the Federal Reserve’s interest rate hikes push wary employers to cut costs.
Facebook and Instagram parent company Meta reportedly plans to cut thousands of employees in its … [+]
Key Facts
About 211,000 people filed initial jobless claims in the week ending Saturday, surpassing economist projections for the first time in a month and marking the highest level since December, according to Labor Department data released Thursday.
Continuing claims rose to 1.7 million from 1.6 million one week prior—hitting the highest level since January 2022 and continuing an upward trend that’s pushed claims up by about 400,000 from 50-year lows in May.
The data comes on the same day career services firm Challenger, Gray & Christmas reported U.S. employers are slashing jobs this year at the fastest pace since 2009, with companies having announced plans to cut 180,713 employees so far this year, up a staggering 427% from 2022.
“Layoffs are typically the last piece in company cost-cutting strategies,” the firm’s Andrew Challenger said in a statement, adding employers are “certainly” paying attention to the Fed’s efforts to tame inflation by cooling the economy with higher interest rates and warning that more forceful waves of job cuts could soon be announced if the economy continues to cool.
In an email, Pantheon Macro economist Kieran Clancy noted the sharp increase from the week prior likely reflected the severe weather across the Midwest and California, but he says the rapid pace of cuts will lead to a “clear and sustained increase” in unemployment claims by the spring, as economic growth potentially slows and more laid-off workers start filing for unemployment.
SURPRISING FACT
Though the overwhelming bulk of job cuts are occuring in technology, February marked the first month in 10 years in which job cuts occurred across all industries tracked by Challenger.
WHAT TO WATCH FOR
The unexpected uptick in claims comes just one day before the Labor Department releases its monthly jobs report for February. On average, economists expect the labor market added about 225,000 jobs last month after a blockbuster 517,000 new jobs were created in January. Vital Knowledge analyst Adam Crisafulli says anything above 300,000 could force the Fed to accelerate the pace of interest rate hikes for the first time since May—”creating a whole fresh set of headwinds” for stocks.
CRUCIAL QUOTE
“The job market is still very tight but the direction of movement is changing,” says Comerica Bank chief economist Bill Adams. He notes the share of Americans quitting their jobs is back down to the lowest since the Great Resignation kicked into high gear, and job openings are down 10% from their peak last March.
FURTHER READING
2023 Layoff Tracker: Meta Reportedly Cutting Thousands Of Employees (Forbes)
How High Will Fed Raise Rates? Powell Fuels Fears That Rates Could Hit 6% (Forbes)
Labor Market Added 517,000 Jobs In January—Unemployment Rate Falls To 54-Year Low Of 3.4% (Forbes)
Source: https://www.forbes.com/sites/jonathanponciano/2023/03/09/jobless-claims-unexpectedly-rise-to-2023-high-as-fed-hikes-threaten-new-waves-of-layoffs/