The number of Americans receiving unemployment payments rose to the highest level in ten months last week, signaling that the growing reports of widespread layoffs hitting a rash of technology firms and some of the nation’s biggest corporations could be leading to a sustained decline in the labor market.
An estimated 1.7 million Americans filed continued claims for unemployment insurance during the week ending November 26, marking the highest level since the week ending February 5 and slightly more than the 1.6 million continued claims economists were expecting, the Labor Department reported Thursday.
New weekly jobless claims, meanwhile, jumped to 230,000 from 225,000 in the week prior—still relatively low by historical standards but continuing an upward trend since March.
The data comes a week after career services firm Challenger, Gray & Christmas reported job cuts announced by U.S.-based employers soared 127% in November on a month-to-month basis, marking the sixth time cuts were higher in 2022 versus one year earlier.
Among the latest to announce cuts, investment bank Morgan Stanley reportedly plans to cut about 1,600 of its 81,000 employees, while fintech firm Plaid on Wednesday said it would cut 260 employees amid “slower than expected growth.”
The surge in layoff announcements “points clearly to a steep increase in claims,” Pantheon Macro chief economist Ian Shepherdson said in Friday comments, positing the recent upturn in initial claims is “evidence that the labor market is softening” and that “it’s just a matter of time” before payroll growth, which has remained strong, eventually weakens.
Despite waves of layoffs, the job market continues to show signs of strength. Total employment increased by 263,000 in November—significantly better than the 200,000 new jobs economists were expecting, according to data released Friday. Nevertheless, economists believe employment will eventually take a noticeable hit as the Federal Reserve’s interest rate cuts, which combat inflation by cooling consumer demand, take a toll on the economy. The latest data “does not scream recession,” David Donabedian, chief investment officer of CIBC Private Wealth US, said in emailed comments—but he also warned “the job market will falter” as the economy heads into a recession next year.
3.7%. That was the unemployment rate last month—flat from October but up from a low of 3.5% in September. EY forecasts the unemployment rate will rise to 5.5% by the end of next year, indicating the economy could lose as many as 3 million jobs.
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