But today’s initial unemployment insurance claims were a doozie that’ll reverse next week.
By Wolf Richter for WOLF STREET.
Initial applications for unemployment benefits (“initial claims”) in the week through Saturday plunged from already low levels, in an outlier move, by 27,000 from the prior week to 191,000, seasonally adjusted, the lowest since 2022 (blue line in the chart).
These are applications for unemployment insurance that freshly laid-off people filed at state unemployment agencies, which then reported them to the US Department of Labor by the weekly deadline, which then combined the data and published it today.
Obviously, one or more big states didn’t get their claims data filed before deadline, this having been the week of Thanksgiving, which is what caused this plunge in claims. But that data gets picked up in the next week, and so we’ll see a spike in claims, which will undo part or all of today’s plunge.
The four-week average fell to 214,750, seasonally adjusted, which is historically low, and in the same low range that it has been in for the past four years.
The four-week average irons out the week-to-week squiggles of weeks when deadlines were missed and weeks when the missed data was included (red line in the chart).
In a historic context going back to the 1970s, initial claims are very low, despite the growth of nonfarm payrolls over the decades. They were lower only during the tight labor market of 2018 and 2019 and during the labor shortages coming out of the pandemic.
This shows that layoffs are really not a problem in this unusual labor market.
The labor market is showing the effects of overhiring during the pandemic by companies that have since then laid off people and hired people at the same time, which is what Amazon and Alphabet have done, with the net effect that their headcount, after exploding for a few years, has been roughly flat – more in a moment.
And the labor market may be showing the effects of the crackdown on illegal immigration and some tightening up of legal immigration, which reduce the supply of labor and slow hiring.
The Challenger Job Cuts Report, also out this morning by outplacement firm Challenger, Gray & Christmas, tracks layoff announcements by US companies of their global workforce. So these are not actual layoffs, but announcements of potential future layoffs globally.
In November, layoff announcements fell to 71,321. The layoff announcements this year were concentrated in February (172,017), March (275,240), and October (153,074).
When Amazon announced in late October that it would lay off 30,000 people of its global workforce – with an undisclosed portion to take place in the US, and the rest globally – it pumped up the Challenger Jobs Cut report to 153,000, even though those layoffs hadn’t happened yet, and not all might happen, and even though only some of the layoffs will take place in the US, and even though Amazon was hiring through the other door.
October’s 153,000 was the highest since March, and that would not have made effective the-job-market-is-cracking headlines. But it was the highest October since October 2020, and that did trigger a round of the job-market-is-cracking headlines.
Continued unemployment insurance claims, also released today by the Labor Department, track people who applied for unemployment insurance at least a week earlier and are still claiming unemployment insurance because they still haven’t found a job.
These “continued unemployment claims” fell in the latest week to 1.939 million, the second week in a row of declines, and are down by 29,000 from the recent high at the end of July.
The four-week average dipped for the second week in a row to 1.945 million.
Over the past four decades, it’s only during the tight labor market in 2018 and 2019 and in the years since covid, particularly the period of the labor shortages in 2021 and 2022, that the level was lower – despite the much larger nonfarm payrolls.
It does mean that people remain on the unemployment insurance rolls a little longer than in 2022-2024 and in 2018-2019, but not nearly as long as they did in the decades before 2018.
So layoffs are very low, but once laid off, it takes people longer to find a job as companies have slowed their hiring.
Alphabet and Amazon, along with other tech giants, exemplify this low-fire low-hire labor market. After the massive overhiring during the pandemic, which was in part responsible for the labor shortages during that time, they started trimming some of the excess in some places, starting in 2022, while still adding in other places, and their global headcount has remained roughly stable since 2022, after exploding in prior years.
Alphabet, which discloses the headcount in its quarterly filings, reported 190,167 employees globally at the end of Q3, up from yearend 2024, and flat with yearend 2022.
Between 2016 and 2023, its headcount had tripled! During the overhiring binge in 2020-2023, its headcount had soared by 62%. These are huge increases for big mature companies.
Amazon, which discloses global yearend headcount in its annual reports, had 1.56 million employees at yearend 2024, slightly higher than in the prior two years but below the peak in 2021 (1.61 million).
Though a tech giant, a big portion of Amazon’s employees are in brick-and-mortar retail (including Whole Foods), ecommerce retail, warehousing, and transportation around the world.
Overhiring: In the two years of 2020 and 2021, its headcount had doubled. From yearend 2015 through yearend 2021, its headcount had multiplied by seven! These are gigantic increases.
Since 2021, it has laid off people and hired people simultaneously – though it’s the layoff announcements that get into the news, a time-honored corporate strategy, eagerly spread by the crisis-media, to cow restless employees.
The low-fire low-hire labor market also shows up in employment data where job creation has flattened out: Private-Sector Job Trends by Industry: From Job Destruction in “Information” to Job Creation in “Mining & Natural Resources”
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the mug to find out how:
