The number of jobless claims rises to 240,000, the highest level since August

The number of jobless claims rises to 240,000, the highest level since August

  • Business
  • November 24, 2022
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The number of Americans filing for unemployment benefits has risen to its highest level since August, although it remains low by historical standards.

About 240,000 people applied for unemployment benefits last week, up 17,000 from the week before, the Labor Department reported on Wednesday. The four-week moving average of claims, which smoothes week-to-week volatility, rose 5,500 to 226,750.

Claims for unemployment benefits are a proxy for layoffs. While job cuts remain low by historical standards, that could change if the Federal Reserve hikes interest rates to cool inflation.

The Fed has already raised interest rates six times since March, dragging down equity valuations and causing the housing market to buckle under the strain of mortgage rates, which have doubled in a year. Many economists expect the United States to slide into recession next year as higher borrowing costs slow economic activity.

In recent weeks, big tech companies like Amazon, Meta, Snap, HP and Twitter have shed tens of thousands of employees to adjust to a slower growth environment. An ongoing central bank hike could result in even more cuts in the previously fast-growing sector.

“All businesses benefit from low borrowing costs, but the technology industry in particular has benefited from low borrowing costs because so much of their revenue is projected into the future. They’re growth companies,” said Nela Richardson, chief economist at ADP, the payroll processor.

She added: “Tech companies account for just 2 percent of US employment. So while tech layoffs affect individual companies and their workers, by and large, employment in the sector accounts for a very small percentage of the total labor market.”

Massive layoffs at Meta point to trouble in Silicon Valley 02:34

Hiring numbers have remained solid overall, with employers adding 261,000 new jobs last month and averaging nearly 407,000 a month this year – on track to make 2022 the second-best year for hiring (after 2021) in government records, the going back to 1940. There are almost two job openings for every unemployed American. The unemployment rate is 3.7%, a few ticks above a half-century low.

Weekly jobless claims were extremely low earlier this year – staying below 200k for much of February, March and April. They started rising in late spring and reached 261k in mid-July before trending lower again.

“We expect layoffs to pick up as demand eases in response to higher interest rates,” Rubeela Farooqi, chief US economist at High Frequency Economics, said in a research note. “However, the move will likely be gradual as companies still face labor shortages and are reluctant to downsize their workforce.”

The Labor Department said Wednesday that 1.55 million people received unemployment benefits in the week ended November 12, up 48,000 from the week before.

CBS News’ Irina Ivanova contributed to the coverage.

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