Image source: CNBC
Jobless claims for the week ended November 19 jumped 240,000, a massive unemployment benefits leap compared to the week before.
According to the Labor Department on Wednesday, there was a sharp increase of 17,000 from last week’s upwardly revised figure of 222,000.
The numbers
The latest jobless claims exceeded economists’ expectations of 225,000.
Current claims reached 1.55 million in the week ended November 12, hitting an eight-month high.
Claims also count people who have applied for unemployment benefits for more than two consecutive weeks.
Unemployment claims remained around historic lows due to a significantly tight labor market.
Read also: Unemployment rate to surge in early 2023, according to Bank of America
Layoffs
Jobless claims continued to rise even as workers began to return after lockdowns ended during the pandemic.
However, things could change.
Big companies, especially in the tech sector, have begun mass layoffs.
However, the layoffs are not necessarily reflected in last week’s jobless claims.
According to Eugenio Alemán, chief economist at Raymond James, many tech workers are safe with severance pay.
Additionally, Alemán is looking for signs of a broad increase in claims from other industries not customarily covered by severance pay.
“And that’s still not happening today,” he said.
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Claims
Economists at Oxford Economics wrote a note Wednesday saying weekly jobless claims are volatile and subject to revisions, especially during the holiday season.
“Therefore, we don’t read too much into the larger-than-anticipated drop in claims,” the economists wrote.
Weekly initial jobless claims have averaged less than 215,000 this year.
While the 240,000 claims is a recent increase, it’s still below the 250,000 weekly claims consistent with a good economy, according to Mark Zandi.
Zandi is the chief economist of Moody’s Analytics.
He also said jobless claims were well below 300,000, in line with the recession.
“I view the increase in layoffs from the prism of ‘good news is bad news,'” wrote Zandi.
“That is, layoffs are awful for those losing their jobs, but it does mean the job market is cooling off, which is critical to getting inflation back and forestalling more aggressive interest rate hikes by the Federal Reserve.”
Mark Zandi admits he expects more layoffs before the new year as major companies across more industries begin to cut wages.
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