Unemployment Benefits Applications Drop as Layoffs Remain Historically Low

The number of Americans applying for unemployment benefits fell last week, signaling that layoffs are remaining at historically low levels despite efforts by the Federal Reserve to loosen the labor market. According to the Labor Department, jobless claims for the week ending May 18 dropped by 8,000 to 215,000, down from 223,000 the previous week.

The four-week average of claims, which helps to smooth out some of the week-to-week fluctuations, increased slightly by 1,750 to 219,750. This data is closely watched as a proxy for the number of layoffs in the U.S. and provides insight into the direction of the job market.

Since the onset of the COVID-19 pandemic in 2020, weekly unemployment claims have consistently remained at historically low levels, despite the Federal Reserve’s efforts to combat high inflation by raising interest rates. The Fed’s goal was to cool wage growth and loosen the labor market, but the economy has remained strong with ample job opportunities and healthy consumer spending.

In April, U.S. employers added the fewest jobs in six months, indicating a potential slowdown in the labor market. However, the unemployment rate has remained below 4% for 27 consecutive months, the longest streak since the 1960s.

While layoffs are low overall, some companies in the technology and media sectors have recently announced job cuts. Google parent company Alphabet, Apple, and eBay are among those who have made layoffs, along with companies like Walmart, Peloton, and Nike.

Despite the slight uptick in jobless claims, the overall number of Americans collecting unemployment benefits increased to 1.79 million during the week ending May 11, up 8,000 from the previous week and 84,000 more than the same time last year. This data, along with other economic indicators, will be closely monitored by the Federal Reserve as they consider future interest rate decisions.