The number of Americans applying for unemployment benefits rose to the highest level since August, although it remains low by historic standards.
Some 240,000 people applied for jobless aid last week, up by 17,000 from the week before, the Labor Department reported Wednesday. The four-week moving average of claims, which smooths out week-to-week volatility, rose by 5,500 to 226,750.
Applications for unemployment benefits are a proxy for layoffs. While job cuts remain low by historic levels, that may change as the Federal Reserve hikes interest rates to cool inflation.
The Fed has already raised its benchmark interest rate six times since March, dragging down stock valuations and leading the housing market to buckle under the strain of mortgage rates that have doubled from a year ago. Many economists expect the United States to slip into a recession next year as higher borrowing costs slow economic activity.
In recent weeks, major tech companies including Amazon, Meta, Snap, HP and Twitter are cutting tens of thousands of employees as they adjust to a slower-growth environment. A continuing hiking campaign from the central bank could lead to even more cuts in the previously fast-growing sector.
“All companies benefit from low borrowing costs, but tech in particular has benefited from low borrowing costs because so much of their revenue is projected in the future. They’re growth companies,” said Nela Richardson, chief economist at ADP, the payroll processor.
She added, “Technology companies represent just 2 percent of U.S. employment, so while technology layoffs affect individual companies and their workers, the sector’s employment writ large is a very small percentage of the overall job market.”
Hiring overall has remained solid, with employers adding 261,000 jobs last month and are creating an average of nearly 407,000 a month this year — on pace to make 2022 the second-best year for hiring (after 2021) in government records going back to 1940. There are nearly two job openings for every unemployed American. The unemployment rate is 3.7%, a couple of ticks above a half-century low.
New weekly applications for unemployment benefits were extremely low early this year — staying below 200,000 for much of February, March and April. They began to tick up in late spring and hit 261,000 in mid-July before trending lower again.
“We expect layoffs to rise as demand softens in response to higher interest rates,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a research report. “However, the move is likely to be gradual given businesses are still struggling with labor shortages and will be reluctant to cut their workforce.”
The Labor Department said Wednesday that 1.55 million people were receiving jobless aid the week that ended Nov. 12, up by 48,000 from the week before.
CBS News’ Irina Ivanova contributed reporting.
