While layoffs continue in the tech sector, overall unemployment claims in the U.S. have reached new lows.
- Applications for unemployment benefits declined last week—hitting the lowest application numbers since September and highlighting the continuing strong labor market.
- According to Labor Department data, unemployment claims fell by 15,000 applications last week.
- Previous projections expected the total number to be nearly 214,000, but the actual number of applications was 190,000. Predicting the number of unemployment claims can be difficult in the winter as seasonal and holiday employment skews numbers.
- However, while new applications declined, those who had already applied and were renewing claims increased in the first week of January. Two weeks before that, continuing claims had been declining.
- Bloomberg economists predict that a better understanding of the current job market will come in a few weeks as seasonal unemployment claims make a clear understanding difficult.
Why it’s news
Big Tech and real estate companies have announced thousands of pending layoffs, but the broader labor market still favors employees. At the end of 2022, the unemployment rate reached 3.5%—a 50-year low.
While the market is still in favor of employees, interest rate hikes from the Federal Reserve could result in layoffs across the broader labor market. Economists at the World Economic Forum recently predicted widespread layoffs in the coming year.
New York, Georgia, and Michigan saw some of the most significant declines in unemployment applications. California had the greatest increase, but the state recently suffered from severe flooding, which may have influenced the number of claims.
Backing up a bit
The 2023 Chief Economists Outlook at the World Economic Forum in Davos, Switzerland, predicts that this year will be fraught with continuing economic uncertainty, but there is a reason for optimism in the coming year.
The Chief Economists Outlook, organized by the World Economic Forum, predicts that governments, businesses, and households will continue to face financial challenges through 2023.
Additionally, nearly two-thirds of global economists predict that their counties will suffer a recession in the coming year. Despite the predicted coming financial troubles, economists predict that the cost of living and energy prices will lessen near the end of this year.
Economists also warn that the challenging economy will lead businesses to continue cutting costs and potential layoffs.
Businesses will likely continue to struggle during 2023. Lessening demand and growing borrowing costs will plague businesses, economists predict. Input costs for businesses will also rise, creating greater difficulty for companies attempting to turn a profit.
These struggles lead economists to predict that there will likely be more layoffs as companies cut costs and reduce spending.