Applications for U.S. unemployment benefits rose last week to a three-month high amid a wave of layoffs at technology companies, a sign of cooling in a tight labor market.
Initial unemployment claims increased by 17,000 to 240,000 in the week ended Nov. 19, Labor Department data showed Wednesday. The median estimate in a Bloomberg survey of economists called for 225,000.
Continuing claims, which include people who have already received unemployment benefits for a week or more, rose by 48,000 to 1.55 million in the week ended Nov. 12, the highest since March. That was also the sixth weekly increase in a row.
Economists have been watching continuing claims more closely in recent weeks because they have been warning indicators of recessions in the past. Although the gauge is up from lows in May this year, it’s still well below last year’s levels and historical averages.
The Federal Reserve has embarked on its most aggressive tightening campaign since the 1980s this year in an effort to tame the highest inflation in a generation. The steep interest-rate hikes have had an impact on sectors such as housing and construction, but overall the labor market has remained robust.
The list of high-profile technology companies announcing job cuts or hiring freezes has been growing, from Amazon.com to Facebook parent company Meta Inc. and personal-computer maker HP, which said this week it would eliminate as many as 6,000 jobs.
The mounting layoffs in the sector don’t necessarily portend weakness in the broader market because many tech companies had ramped up hiring during the pandemic-era e-commerce boom. Still, other industries aren’t immune. Even FedEx Corp. is furloughing workers in its freight unit ahead of what’s usually the busiest season of the year for the company.
“Initial jobless claims for the week ending Nov. 19 surged and continuing claims remained on a persistent uptrend, pointing at softening in the labor market. The 113,000 increase in continuing claims between the survey weeks for the November employment report is consistent with layoffs spreading in the technology industry, as hiring freezes and job cuts mount in select industries,” economist Eliza Winger wrote in a report for Bloomberg Economics.
The four-week moving average, which smooths out volatility from week to week, increased to 226,750.
On an unadjusted basis, initial claims rose by about 48,000 to almost 248,200 last week. The increases were spread across the states, with California, Illinois and Georgia among the largest ones.
The claims figures tend to be more volatile around U.S. holidays. The latest data spanned the week between Veterans Day and Thanksgiving.
“We expect layoffs to rise as demand softens in response to higher interest rates,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a research report. “However, the move is likely to be gradual given businesses are still struggling with labor shortages and will be reluctant to cut their workforce.”
First Published November 23, 2022, 5:58pm
