The number of new applications for unemployment benefits increased by 6,000 last week to 260,000 amid increasing fears of recession.
Rising jobless claims, a proxy for layoffs, are a sign that the labor market may be facing some turbulence, although the figures are still low in a historical sense.
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Around this time in August 2021, new claims were averaging over 400,000 per week. The number of jobless claims bottomed out at 166,000, tallied in mid-March, the lowest figure since 1968.
“We think the risk is that claims continue to drift higher as labor market conditions slowly cool, but we don’t anticipate a sharp rise from current levels any time soon as demand for workers continues to outstrip supply,” economists with Oxford Economics said.
Still, the fact that jobless claims keep ticking up in recent weeks shows that the tight labor market may be slowing in response to the Federal Reserve aggressively jacking up interest rates. Many economists believe the United States may slip into a recession, and others believe the country is already in the grips of a recession.
GDP fell at a 0.9% annualized rate in the second quarter, a preliminary estimate from the Bureau of Economic Analysis recently showed. The report marks the second straight quarter of declining inflation-adjusted GDP — a measure commonly used to define a recession. GDP tumbled at a 1.6% rate in the first quarter.
Government officials and economists use recession designations provided by the National Bureau of Economic Research, a private academic group. The bureau doesn’t provide a narrow statutory definition to declare a recession. Rather, it relies on the judgment of a group of economists.
The group broadly defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
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Still, the labor market has kept humming along. The economy added 372,000 jobs in June. The unemployment rate also remained at 3.6% in June, matching the low level it was at right before the pandemic.
All eyes are on Friday’s jobs report for July. If fewer jobs are added than the 250,000 expected, it would be seen as further evidence that the Fed’s tightening is beginning to dig into the labor market.
