On “Making Money,” chief economist and market strategist Michael Darda of MKM Partners responds to the June job layoffs that affected millions of Americans.
The number of Americans requesting unemployment benefits increased somewhat last week, keeping close to the highest level of the year. This is the newest indication that the extraordinarily tight labor market is beginning to loosen up.
According to data from the Labor Department released on Thursday, applications increased from the downwardly revised 254,000 recorded the week before to 260,000 for the week ended July 30. This is more than the 218,000 pre-pandemic average for 2019 and narrowly fell short of mid-eight-month July’s peak of 261,000 claims.
The number of Americans getting unemployment benefits continuously, or continuing claims, increased slightly to 1.416 million for the week ending July 23, up 48,000 from the previously revised amount. Almost 12.96 million Americans were getting jobless benefits a year ago.
The labor market has been one of the economy’s few shining lights for months; according to the June jobs report, the unemployment rate remained at 3.6 percent for the fourth consecutive month, close to a historic low.
On May 11, 2022, a Lowe’s shop in Dublin, California has a sign outside that reads, “Now Hiring.” (David Paul Morris/Getty Images via Bloomberg) )
However, there are indications that the labor market is beginning to deteriorate as numerous businesses, such as Walmart, Apple, Microsoft, Alphabet’s Google, and Meta, have recently announced hiring freezes or layoffs.
The most recent week saw an increase in first unemployment claims, and there is no immediate end in sight, according to Robert Frick, corporate economist at Navy Federal Credit Union. As the economy slows, major firms, like Walmart, the largest employer in the nation, are announcing layoffs.
The Federal Reserve’s fight on inflation has increased concerns that the U.S. economy is either about to enter or is currently in a recession. As it struggles to control consumer prices, which soared 9.1 percent in June, the largest year-over-year increase since 1981, the central bank is boosting interest rates at the quickest rate in decades.
Despite indications of an economic downturn, Policymakers approved raised interest rates by another massive 75 basis points, three times the typical amount, at their meeting last week. Since then, they have indicated they are “nowhere near” finishing this tightening cycle.
(Robert Knopes/Education Images/Universal Images Group through / Getty Images) shows the Department of Labor in Washington, D.C.
The Labor Department’s more keenly anticipated July employment report, which is projected to indicate that the economy added 250,000 jobs last month, is released the day after the jobless claims data. According to predictions made by Refinitiv experts, the jobless rate likely remained at 3.6 percent.
In other economic news, the Commerce Department announced on Thursday that a rise in shipments of energy items and a drop in consumer demand for imports caused the U.S. trade deficit to drop 6.2 percent to $79.6 billion in June. It’s the first time the deficit has been below $80 billion since 2021.