California sees rise in people losing their jobs

Applications for jobless benefits in California went up for the week ended June 1, according to data from the U.S. Department of Labor, suggesting that the number of residents in the state who are unemployed increased.

The state recorded about 2,400 more initial applications for unemployment than the previous week to 41,200 claims, in one of the highest figures of any state during the week. The figures reported were unadjusted for seasonal factors and could be revised.

The development was a reversal to what transpired the week ending May 25, when California had one of the highest decreases of any state when reported about 1,000 fewer jobless applications, the data showed.

Minnesota reported an increase of close to 2,800 unemployment claims, while Pennsylvania had 1,540 more, almost the same number as Ohio, compared to the week prior.

Overall, the country saw unemployment applications jump 8,000 to 229,000 for the week ending June 1.

Economists said there are signals that the U.S. labor market is softening after the fluctuations from the pandemic-induced crisis that depressed economic activity and sparked mass layoffs across the country. A reopening of the economy created huge demand for workers. But recent signals show hiring has slowed, but layoffs remain low, said Swiss Re Institute’s senior economist, Mahir Rasheed.

But Rasheed said that current trends suggest a return to pre-pandemic dynamics in the labor market. In 2019, the average weekly jobless claims were at 218,000, which almost matches the current number of 222,000. Meanwhile, continuing claims averaged 1.8 million, nearly a million fewer than the decade prior to the pandemic.

“This tells us that even if individuals are being laid off, they are not spending much time unemployed,” Rasheed told Newsweek.

The jump in jobless benefits was not happening in just one state, he added.

“I wouldn’t say there is any one region of the country that is struggling more than others,” he said. “Claims in the Midwest have risen the most relative to a few months ago, but they are returning to more normal levels after extreme tightness over the past two years.”

The environment of tight financial conditions as a result of high interest rates from the Federal Reserve was contributing to a slowdown in recruitment.

“We see corporates exhibiting more cautious hiring behavior given the materialization of higher interest rates and gradually softening demand from consumers in the first half of 2024, combined with heightened uncertainty over when interest rates will decline,” Rasheed said.

The Fed has held rates at the same two-decade high since last summer as they try to slow elevated inflation to its target of 2 percent. The higher-for-longer environment will impact the labor market, which in turn could spark a reduction in borrowing costs.

“We think the labor market will continue to moderate at a steady pace over the coming months, eventually contributing to the Fed’s first rate cut later in [the third quarter],” Rasheed said. “Combined with higher immigrant entrants into the labor force, we expect the unemployment rate to increase modestly over the coming months.

“However, structural tightness in the job market tied to labor hoarding, still-strong wage growth, and healthy [if softer] consumption should preclude a recessionary deterioration.”