New filings for unemployment benefits fell to a 10-month low last week, a stark contrast to the recent spike in reports of job losses at prominent companies.
There were 186,000 new claims added, the fourth week in a row that new claims were below the pre-pandemic average, according to Labor Department data released Thursday.
This weekly claims data, though, often fluctuates around the holidays because of seasonal hiring, and those factors have been compounded by COVID-19 infections from a year earlier.
But there is another explanation for the difference between news reports of layoffs and the real-time data. While layoff announcements have been publicly made by businesses, that does not mean that the job losses will take place right away.
Many companies give their employees notice of about one to three months, which means we should expect a spike in the claims number around summertime as more companies come out with layoff announcements.
That coincides with our base forecast of a recession in the second half of the year, once the last defense against a recession—the labor market—cracks under monetary policy pressures.
Most layoff news is coming from larger companies, which for the most part aggressively added employees during the pandemic, especially technology and real estate companies.
Middle market and smaller companies are still hoarding employees, according to the data from the Bureau of Labor Statistics. The full impact of rate hikes has yet to be fully felt in small and midsize businesses, making it a great time for smaller size companies to take in more talent that otherwise would not be available.
The takeaway
We should get a better sense of where layoffs are heading in the next three months after the holiday season fades, keeping in mind that jobless claims are still a great leading indicator of the strength of the labor market and the overall economy.
