The U.S. labor market is still in strong shape compared with the prepandemic average. However, slowly but surely, the number of Americans filing for their first round of unemployment benefits is beginning to climb.
An analysis of historical data by Bespoke Investment Group shows that a recession could be in the cards, given the growth this year in unemployment claims, even if they haven’t quite reached levels consistent with earlier recessions (see chart).
The chart shows the number of Americans filing for jobless benefits has been steadily climbing since the start of 2023. While the trajectory looks similar, on average, it’s important to note that jobless claims have been higher during previous periods preceding a recession.
According to data released by the Department of Labor on Thursday, initial jobless claims rose by 22,000 to 264,000 in the week ended May 6, the Labor Department said Thursday.
That’s the highest level since October 2021, but it’s still relatively low compared with recent history.
If one excludes data from the year 2020, when claims were elevated due to the advent of the COVID-19 pandemic, the average weekly reading on initial claims over the past 10 years is 278,134, according to a MarketWatch analysis of historical data.
As economists wait to see whether the U.S. economy will enter recession in the months ahead, many are keeping a close eye on employment data.
See: Stock-market investors scan these early recession indicators for signs the U.S. economy will crack. You should, too.
Monthly labor-market data released earlier this month showed the U.S. created 253,000 new jobs in April, surpassing economists’ expectations for 180,000 new jobs. However, figures for the prior two months were revised lower.
Corporations have been laying off workings with alacrity over the past six months, with job losses concentrated in the technology, finance and media fields. Recently, Microsoft Corp.-owned LinkedIn announced plans to lay off more than 700 people.
Amazon.com Inc.
AMZN,
which hired workers in droves during the pandemic, has already announced nearly 30,000 layoffs.
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