By Tom Ozimek
The number of Americans filing initial jobless claims rose to a six-month high last week, government data show, while a separate report showed that the number of job cuts jumped 57 percent month-over-month in June, suggesting demand for labor is cooling.
Initial filings for state unemployment benefits increased 4,000 to a seasonally adjusted 235,000 for the week ended July 2, the Labor Department said in a July 7 report (pdf).
That’s the highest level of initial claims since mid-January 2022, while pushing the four-week moving average up to 232,500, the highest since early December 2021.
While the numbers suggest some clouding of the job market, they’re not yet ringing recessionary bells, some analysts said.
“Jobless Claims (leading #indicator) 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.
Continuing unemployment claims, which run a week behind the initial filings and reflect the total number of people receiving benefits through traditional state programs, jumped by 51,000 to 1.375 million.
‘Financial Pressures and Slowing Demand’
“Employers are beginning to respond to financial pressures and slowing demand by cutting costs,” Andrew Challenger, senior vice president at Challenger, Gray & Christmas, said in a statement. “While the labor market is still tight, that tightness may begin to ease in the next few months.”
The automotive sector announced the most cuts in June (10,198), with the year-to-date total representing a 155 percent increase compared to the same period last year.
“Technology companies are also cutting workforces as inflation and recession concerns deepen,” Challenger said.
‘Caught in the Squeeze’
While concerns about inflation have dominated headlines and sent U.S. consumer sentiment plunging to historical lows, recession fears have been on the rise as the Federal Reserve has set out on an aggressive tightening cycle in a bid to cool prices.
Economists recently polled by Bankrate said there’s a 52 percent chance that the U.S. economy could tip into a recession within the next 12 to 18 months. That’s sharply higher than a similar poll carried out in the prior quarter, in which just one-third of respondents predicted a recession.
Bankrate Senior Economic Analyst Mark Hamrick told The Epoch Times in an emailed statement that Fed rate hikes and persistently high inflation pose a challenging backdrop for the labor market.
“Caught in the squeeze between historically high inflation and elevated anxiety about recession risk, the job market is being closely watched for signs whether it is the next proverbial shoe to drop,” Hamrick said. “Adding to a toxic brew of challenges and uncertainty is the higher interest rate environment, which the Federal Reserve has signaled could prevail for years.”
‘An Even More Restrictive Stance’
Minutes from the latest Federal Reserve meeting showed policymakers determined to get a handle on runaway prices and prevent higher inflation expectations from becoming entrenched, even as signs of economic cooling have emerged.
“Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist,” the minutes stated.
The Fed is expected to deliver another 75 basis point hike at its next meeting later in July, which would put the target benchmark rate within a range of 2.25 percent and 2.50 percent. The odds that policymakers will raise rates by another three-quarters of a percentage point are now at 98.7 percent, according to the CME FedWatch Tool, which is based on Fed Funds futures contract prices.
Despite the rise in recession expectations, the Bankrate survey suggests the labor market is robust enough to withstand the Fed’s rate hikes without pushing unemployment up too high, by historical standards.
“Countering the current dour mood, the consensus of the economists surveyed by Bankrate is that the job market should weaken only slightly over the next year with the unemployment rate rising to 4.2 percent by June 2023,” Hamrick said.
“Humility is called for, however, since the many remarkable developments over the past couple of years have shown the imperfect ability to predict much beyond the near-term,” he added.
The latest Job Openings and Labor Turnover Survey (JOLTS) report from the Labor Department shows that the number of job openings has fallen by nearly half a million, though at 11.3 million it remains not far below record highs.
The JOLTS report also shows there are nearly two job openings for every unemployed person, suggesting a relatively tight labor market.
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