Last week saw a decrease in layoffs, but a significant increase in the number of workers remaining on unemployment rolls, indicating a slowdown in hiring and economic uncertainty.
The U.S. labor market is sending conflicting signals, as a recent report shows a seven-month low in weekly initial jobless claims, but a three-year high in the number of American workers continuing to receive benefits after filing initially. This suggests a decrease in layoffs but a growing challenge in getting rehired.
The most recent unemployment
data from the Labor Department, released on Nov. 21, reveals that initial claims for jobless benefits dropped by 6,000 to 213,000 for the week ending Nov. 16, marking a seven-month low. However, continuing claims, representing those still receiving benefits after an initial filing, increased by 36,000 to 1.91 million, the highest level in three years.
Analysts have noted the mixed signals, with some suggesting that the rise in continuing claims could impact the unemployment rate, while others hint at an increased likelihood of a recession.
“There is little evidence of significant layoffs occurring,” said Gisela Hoxha, an economist at Citigroup. “However, in an environment with limited hiring, individuals who are laid off are finding it harder to secure new jobs and are staying on unemployment benefits for longer periods, indicating potential risks to the unemployment rate.”
Although the unemployment rate was historically low at 4.1 percent
in October, it has risen over the past year from 3.8 percent in October 2023, indicating a softening labor market. Federal Reserve officials cited a cooling labor market as a factor in their recent decision to lower interest rates, despite describing job conditions as “solid.”
Additionally, the latest data from the Bureau of Labor Statistics (BLS) showed that the U.S. economy added only 12,000 jobs last month, falling
well below analysts’ forecasts of 113,000 positions and marking the smallest monthly gain in four years.
“Continuing claims are on the rise again, while new claims are declining,” stated the Real Developments, CFA account in a
post on X. “Not many individuals are losing their jobs, but those who do are struggling to find new employment opportunities. This pattern is typical before a recession, where a surge in layoffs leads to a sharp increase in unemployment due to a lack of hiring for laid-off workers.”
The labor market, particularly in manufacturing, is facing challenges. The sector has experienced job losses for three consecutive months, reflecting broader issues related to decreasing demand and diminishing new orders. In October, manufacturing saw a loss of 46,000 jobs, according to BLS
data, with industry experts pointing to a slowdown in 11 out of 14 tracked industries.
“In October, manufacturing hours worked saw the largest decline since December 2023, while unemployment insurance claims increased and building permits decreased,” noted Justyna Zabinska-La Monica, senior manager of business cycle indicators at The Conference Board, in a statement on Nov. 21.
The challenges in manufacturing hiring align with a broader economic trend, namely the ongoing decline of the Conference Board’s Leading Economic Index (LEI). The LEI, designed to forecast economic turning points, dropped by 0.4 percent in October, marking its 18th consecutive month of decline. New manufacturing orders were among the primary contributors to the LEI’s decline, along with decreases in hours worked and building permits.
“The most significant negative impact on the LEI’s decline came from new orders in manufacturing, which remained weak in 11 out of 14 industries,” Zabinska-La Monica stated.
Economists often view the LEI’s trajectory as an early warning system for recession risks. With manufacturing employment and activity
struggling, combined with a labor market that is finding it challenging to reabsorb laid-off workers, the latest indicators suggest that the U.S. economy may be heading towards a challenging period.
