Initial weekly claims for state unemployment benefits rose by 21,000 to a seasonally adjusted 211,000 for the week that ended on March 4. This is the largest recorded increase since October, and lifted initial claims to a two-month high.
This number is inching closer to the 300,000 level, which economists associate with a recession. Claims before this week had stayed well below the 200,000 mark for seven straight weeks. (Related: Number of Americans with a second job up by 6% as inflation continues to eclipse wage gains.)
The four-week moving average for new unemployment claims, which is a more reliable measure of labor market trends as it irons out weekly fluctuations, also climbed by 4,000 to 197,000 for that week.
Economists and market researchers look at initial applications for unemployment benefits as they are considered a useful proxy for looking at job layoffs.
Layoffs, particularly in the technology sector, have been mounting as many companies that claim they overhired during the Wuhan coronavirus (COVID-19) pandemic-era boom scale back their operations to more manageable levels.
Big Tech corporations like Amazon, DoorDash, Facebook parent Meta, IBM, Microsoft, Salesforce and Twitter have all announced massive layoffs in recent months, which are likely affecting unemployment claims.
The situation could also be made worse as layoffs continue amid slower hiring, as companies concerned about a recession install hiring freezes.
"One influence on initial UI claims in the coming weeks, however, could be saturation of businesses that have been quickly absorbing laid-off workers," noted Kurt Rankin, senior economist for financial services company PNC. "With talk of deteriorating economic conditions and the Federal Reserve set on raising rates further through at least mid-2023, businesses may turn more cautious in their hiring practices."
Unemployment claims in New York, California surge
The data gathered from the Department of Labor shows a surge in applications for unemployment claims in New York and California.
The increase in New York is being associated with a mid-winter school recess from Feb. 20 to 24, during which seasonal and contractual workers were laid off. This is according to Lou Crandall, the chief economist at market research firm Wrightson ICAP.
"[New York state's claims were] a predictable response to the previous week's mid-winter school break and will probably be reversed in next week's report," he said.
Without seasonal adjustments, initial unemployment claims shot up by 35,357 to 237,513 filings earlier this month. New York alone saw an additional 16,363 filings, while California recorded an increase of 10,489 filings.
Notable rises in initial unemployment benefits applications were also recorded in Kentucky, Oregon and Ohio. Only two states – Massachusetts and Rhode Island – saw unemployment claims fall significantly.
While his view of New York state's unemployment filings is optimistic, Crandall reported a more dour outlook for California. He viewed the rise in California filings as "likely to be more persistent."
He further expects overall seasonally adjusted claims to stay within the 195,000 to 200,000 range for the next week. This prediction is in direct contrast to Rankin's, who believes that any new layoffs in the coming weeks "would more directly translate into higher UI claims."
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