New filings for jobless benefits surged last week to above the pre-pandemic level for the first time in five months, the Department of Labor reported on Thursday. Behind the increase were a slowdown in hiring and an acceleration in layoffs in recent weeks.
New claims for jobless benefits increased by 27,000 to 229,000 for the week ending June 4, from an upwardly revised 202,000 in the prior week. The pre-pandemic level in 2019 was 218,000.
The increase was broad-based, with no state recording significant changes in new claims. That suggests that the increase was less likely driven by weekly fluctuations in the data or by accounting errors.
To better understand the longer term trend, we monitor the four-week moving average and the 13-week moving average. The four-week moving average rose for the eighth straight week, from 207,000 to 215,000.
Last week’s increase also pushed the 13-week moving average to 192,000 from 189,000, as the weekly reading stayed above the moving average for the sixth week in a row. The 13-week moving average remains below the 2019 average.
Many businesses have recently announced hiring freezes and potential layoffs. Most of these are tech companies like Coinbase and Meta that benefited substantially during the pandemic, and are more susceptible to an economic slowdown and interest rate increases.
The impact of slowing demand and elevated inflation that eats into profit margins is expected to spill over onto the rest of the economy relatively quickly in the next couple of months as the Federal Reserve aggressively moves to tame inflation. This dynamic is also in line with our estimate of a slowdown in employment starting in June.
Still, the labor market will remain tight for some time as labor demand has not showed any sizable decline, while labor supply has not picked up quickly enough.
Total continuing claims for the week ending May 28 were unchanged at 1.306 million. The insured unemployment rate was also unchanged at 0.9% for the same week. But as new claims continue to rise, these figures will certainly tick up.