January 1, Layoffs Loom as Unemployment Applications Spike, Is Economic Deterioration Inevitable?

Initial applications for US unemployment benefits saw a significant increase last week, potentially indicating a surge in layoffs. This adds to existing concerns that the American economy might be deteriorating.

First-time claims rose by 13,000 to 242,000 in the week ended June, after witnessing similar increments in each of the two prior weeks. This brought claims to their highest level since August 2023, as revealed by the Labor Department data released on Thursday. The median forecast in an Econoday survey of analysts was only 222,000.

Notably, initial claims serve as a proxy for layoffs. The consistent three-week rise in claims suggests that companies might be cutting down on their headcounts, particularly as the economy appears to have slowed down in recent months.

Moreover, continuing claims, reported with a one-week delay, escalated by 30,000 to 1.82 million. This increase implies that workers who have lost their jobs are now facing greater difficulty in securing new positions.

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