For the first time last week, initial jobless claims fell by 8,000, with 210,000 Americans filed unemployment claims. This is only a minuscule dip from the week before, but claims remain near four month high percentages. Ongoing claims went up unexpectedly from 1.315 million to 1.346 million.
Bank of America commented on the newest unemployment stats, claiming that, in this case, bad news is actually good news for the American economy. In order for inflation to decrease, there must be a dramatic slowing of job growth accompanied by a rise in the unemployment rate. So far, the job market is the hottest it has been for some time.
Inflation is also at an all-time high. In March, inflation reached 8.5 percent. In April, this number dipped slightly to 8.3 percent. Both of those numbers are record highs not seen in four decades, but any relief is welcome from the American consumer. Gas prices are at record highs, with the price leveling off this week after eleven straight days of record-high national gas price averages. All fifty states have gas prices of $4 or more. In California, the average price is over $6.
It is difficult to determine the level of claims consistent with a flat unemployment rate, but economists at Bank of America think it needs to get well above 300,000.
The good news for The Federal Reserve – which really isn’t – is that labor market signals have started to show weakness in recent months.
As Bank of America experts note, the lower the unemployment rate gets, the harder it is for the Fed to stop inflation without triggering a recession. That would not only bad for the overall economy, but is particularly bad for less advantaged parts of the population. A recession is defined as two consecutive quarters with a dip in GDP. There was a 1.5 percent drop in GDP in the first quarter of 2022. This number was revised from the initial 1.4 percent drop determined in early May.
At the same time, the outlook for the economy is uncertain, which is one reason the stock market has fallen in recent weeks. During the first quarter, corporate profits fell across the board. Many expert economists believe this signals a combination of eroding profits and dipping stock prices, which could eventually lead to employee layoffs or hiring freezes at the very least.
Retail giant Walmart has officially lowered its full-year earnings predictions citing high inflation as the impetus for the change.
Snapchat is among many major tech companies that has suffered stock share price losses, and its parent company, Snap, announced a profit warning earlier in the week. As a result, there has been a major sell-off of social media stock. Meta, the parent company of Facebook, and Twitter have seen the price of shares drop in recent weeks as well. Amazon has also seen a great drop in the price of its stock.
Chief economist at FWDBONDS, Christopher Rupkey, says, “The biggest expense of most companies is labor. High-flying tech companies have seen their share prices plummet which will force management to tighten their belts.”
Unemployment claims were down by 8,000 for the week ending May 21. The week prior, initial claims were the highest they’d been since January. In California, jobless claims were down by more than 5,000. In Illinois, claims were down by just over 4,000, and in Kentucky, jobless claims were down by 3,564.
While some economists say this could be attributed to a government formula in which seasonal fluctuations are stripped from the data, other economists believe this is an indication that some employers are already having to lay off workers. Just two weeks ago, Netflix announced it had laid off at least 150 workers in the United States.
A Commerce Department report showed corporate profits fell at 2.3 percent in the first quarter. This represents a loss in corporate profits totally $66.4 billion. This is the first drop in two years.