U.S. Unemployment Claims Fall as Layoffs Remain Historically Low

The number of Americans applying for unemployment benefits fell last week, underscoring the resilience of the labor market despite the Federal Reserve's ongoing efforts to temper economic activity. The U.S. Department of Labor reported Thursday that jobless claims for the week ending May 18 dropped by 8,000 to a seasonally adjusted 215,000, down from 223,000 the previous week. The four-week moving average, which smooths out week-to-week fluctuations, rose slightly by 1,750 to 219,750.

Jobless claims are a critical indicator of the number of layoffs and a barometer of the job market's health. Since the mass job losses in the early days of the COVID-19 pandemic, claims have remained at historically low levels.

Federal Reserve's Impact on the Labor Market

The Federal Reserve has raised its benchmark borrowing rate 11 times since March 2022 to curb four-decade-high inflation. These rate hikes aim to loosen the labor market and slow wage growth, which can drive inflation. Despite these aggressive moves, the job market has shown remarkable resilience. In April, U.S. employers added 175,000 jobs, the fewest in six months, signaling a potential cooling of the labor market. The unemployment rate edged up to 3.9% from 3.8%, maintaining below 4% for 27 consecutive months, the longest streak since the 1960s.

Layoffs and Economic Indicators

Despite the Federal Reserve's actions, layoffs remain low. In April, the U.S. reported 8.5 million job openings, the lowest in three years. This moderation in hiring and wage growth could provide the data the Fed needs to consider cutting interest rates. A recent cooler reading on consumer inflation in April may also influence the Fed's next rate decision.

However, there has been an uptick in layoffs announced by companies, particularly in the technology and media sectors. Google parent company Alphabet, Apple, and eBay have all recently announced job cuts. Outside tech and media, companies like Walmart, Peloton, Stellantis, Nike, and Tesla have also made similar announcements.

Despite these cuts, the overall number of layoffs remains low. As of the week ending May 11, 1.79 million Americans were collecting jobless benefits, up by 8,000 from the previous week and 84,000 more than the same time last year.

The latest data on jobless claims indicates that while there are signs of the labor market cooling, layoffs remain historically low. This stability comes despite the Federal Reserve's rate hikes and other economic pressures. As the economy continues to navigate post-pandemic adjustments, the resilience of the job market suggests a positive outlook for American workers.