New claims for unemployment benefits increased only slightly last week, a sign that the eagerness to hire and retain U.S. workers remains very high despite the prospects for an economic slump next year.
Initial jobless claims rose by 4,000 to a seasonally adjusted 230,000 in the week that ended on December 3, the Department of Labor said Thursday. That was in line with expectations and close to the prepandemic weekly average in 2019 of around 218,000.
Initial claims are a proxy for layoffs. Despite many media headlines about layoffs in the finance and technology sectors, these are relatively tiny parts of the U.S. labor market. At the pre-Elon Musk height of Twitter’s payroll size, the company employed around 7,900 employees, for example. Firing half of them did not move the needle on unemployment claims. Google, one of the largest Silicon Valley employers, has a worldwide workforce of around 160,000, so even a layoff of 20 percent of its workforce would tack on just 32,000 jobless claims.
And although several major companies have slowed or stopped hiring in recent months, job vacancies remain very high and payroll growth robust. In November, employers added 263,000 workers to their payrolls. As of the last day of October, employers were trying to hire workers for 10.3 million open positions.
Continuing claims—the number of people seeking unemployment benefits after the initial week—climbed by 62,000 to 1.67 million in the week ended November 26. This is the highest level since late February but is very low by historical standards. The increase could reflect the idea that some laid off workers are having trouble finding new positions or are taking more time to find a position they like. With unemployment very low and vacancies high, workers are likely becoming more selective about which jobs to accept.
Federal Reserve officials have made it clear that they regard the labor market as seriously unbalanced in a way that risks inflation becoming entrenched. As Jerome Powell pointed out recently, hopes that higher wages would lead people to rejoin the labor force have not panned out. So Fed officials are convinced they must dampen employers’ appetite for labor by reducing aggregate demand in the economy and bringing economic growth below its long-term trend.
The level of jobless claims over the most recent weeks suggests that Fed policy has not yet done much to dampen demand. The four-week moving average was 230,000.
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