America’s Jobless Ranks Swell

“Good” news! US jobless claims rose sharply last week.

Note the scare quotes. Generally speaking, we’re not supposed to celebrate when our fellows are forced into the unemployment lines, but markets are currently operating in an extreme example of a “bad news is good news” regime.

The Fed desperately needs the labor market to loosen up, lest officials should be compelled to persist in rate hikes beyond the 100bps in additional increases traders suspect may be coming.

In that regard, the 21,000 increase in initial claims reported on Thursday was a welcome development, albeit certainly not for the affected individuals.

Last week’s jump was the largest in more than five months, and the 211,000 headline snapped a seven-week stretch below the 200,000 level.

Initial claims are now the highest since late December, and the four-week average, at 197,000, the highest since mid-January.

Consensus expected 195,000 from the headline, so this was a notable miss (or a “beat,” depending on how you want to look at it). Unadjusted claims jumped 35,000. Continuing claims, at 1.718 million for the week ended February 25, rose 69,000 and came in ahead of estimates as well.

Challenger job cuts, released earlier, were up 410% YoY for February. Measured on a two-month rolling basis, job cuts are the highest since October of 2020. The Challenger figures showed employers have announced 180,713 job cuts so far in 2023. Of the reductions announced last month, nearly a third were in tech.

“Certainly, employers are paying attention to rate increase plans from the Fed [and] many have been planning for a downturn for months,” Andrew Challenger, the firm’s senior vice president, said. “If things continue to cool, layoffs are typically the last piece in company cost-cutting strategies.”