Layoffs rise to pre-pandemic levels but remain low
Weekly layoffs have risen modestly since hitting a 50-year low in March, indicating the white-hot job market is cooling off slightly.
Workers last week filed 229,000 initial unemployment claims, the Labor Department said Thursday, a slight drop from the 231,000 filed the prior week. The four-week average for claims, which smooths out some of the week-to-week volatility, rose by 4,500 from the previous week, to 223,500.
After falling to a 50-year low of 166,000 in late March, weekly claims now hover between 200,000 and 250,000 a week — roughly where they were before the pandemic.
"Overall, layoffs remain low, but the four-week average has moved up in 10 out of the last 11 weeks," Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note. "Rather than signaling dramatic weakening, a gradual increase in unemployment filings is likely indicating supply and demand are – slowly – coming into better balance."
Hiring remains robust, with employers adding 390,000 jobs in May, but turmoil in financial markets along with rapidly rising interest rates have led to a pullback in some sectors of the economy, with tech startups in particular freezing hiring plans and cutting staff.
Online automotive retailer Carvana said last month that it's letting about 2,500 workers go, roughly 12% of its workforce. Online real estate broker Redfin, under pressure from a housing market cooled by higher interest rates, said last week that it was laying off 8% of its workers.
Those cuts have extended to companies in the cryptocurrency sector, where prices for digital assets have cratered in recent months. Crypto trading platform Coinbase Global said last week it intended to cut about 1,100 jobs, or approximately one-fifth of its global workforce, as part of a restructuring plan to help manage operating expenses in response to current market conditions.
"Bottom line, the pace of firings still remains very low but the trajectory has certainly curled up," Peter Boockvar, chief investment officer at the Bleakley Advisory Group, said in a research note. "It's a strange labor market where we hear about a pause on hirings from some high profile tech names but the airline industry is nowhere close to getting back to its pre-COVID staffing levels which is leading to thousands of flight cancellations."
The Federal Reserve is also aggressively hiking interest rates in a bid to tame the worst inflation in four decades — a move that threatens to cool down the job market further. The Fed last week raised its main borrowing rate by three-quarters of a point. That increase is on top of a half-point increase in early May.
The Associated Press contributed reporting.
