Weekly unemployment claims fall despite mass layoffs

Data released by the Labor Department on Thursday show that first-time applications for unemployment benefits fell last week, despite thousands of layoffs announced by major technology and media firms.

The number of first unemployment insurance claims for the week ending January 21 totaled 186,000 after seasonal adjustments, down 6,000 from last week's figure of 190,000. Over the past month, roughly 197,500 Americans applied for new jobless benefits, which remains well below pre-pandemic levels.

The four-week average of unemployment claims fell by 9,250 to 197,500. For the first time since May last year, the number is below 200,000. With high inflation, rising interest rates and deep global uncertainty, the jobless claims data is the latest sign that the U.S. economy is strong.

According to Commerce Department data released Thursday, the U.S. economy grew by 2.1 percent in 2022 at an annualized rate of 2.9 percent in Q4. Averaging 375,000 jobs a month, the U.S. added 4.5 million jobs last year.

Generally, unemployment claims are a proxy for layoffs, which have been relatively low since the pandemic wiped out millions of jobs in the spring of 2020. Federal Reserve officials closely monitor the labor market and raised interest rates seven times last year to slow economic growth, bring down inflation and reduce job growth.

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The Labor Department reported earlier this month that U.S. employers added 223,000 jobs in December, suggesting a healthy economy despite the Fed raising interest rates rapidly. It was the lowest unemployment rate in 53 years, at 3.5 percent.

Some Americans may have lost their jobs and have yet to apply for unemployment benefits, so new weekly jobless claims may not accurately reflect layoffs.

Layoffs across the board

As companies strive to rein in costs in the face of a global economic downturn, big tech companies and corporate giants have been laying off employees.

Over the past four months, major tech companies have laid off more than 200,000 employees, most of whom worked in high-paying white-collar positions. This month alone, tech companies have announced over 50,000 layoffs, including from Alphabet, Microsoft, and Amazon.

In a staff memo, Alphabet Inc announced that it was laying off about 12,000 employees due to "a different economic reality," doubling down on artificial intelligence (AI) and cutting experimental project staff.

Taking a $1.2 billion charge to earnings, Microsoft announced 10,000 job cuts through March 31 as cloud-computing customers reassess their spending.

Meta Platforms announced last November that it would cut over 11,000 jobs, or 13 percent of its workforce, amid a crumbling advertising market and decades-high inflation.

In November, Twitter also laid off employees. Following Elon Musk's $44 billion takeover, it aggressively cut its workforce across departments, including communications, content curation and engineering. The cut was smaller in the team responsible for preventing misinformation's spread due to concerns about content moderation.

Due to a slowdown in demand for faux meat, vegan meat producer Beyond Meat is planning to lay off 200 workers to save about $39 million in wage and benefit costs.

Bed Bath & Beyond also plans to cut more employees this year to cut costs. The home goods retailer announced last year that it would cut 20 percent of its corporate and supply chain staff.

In the health and pharmaceutical sector, Johnson & Johnson has announced it may have to cut some employees due to rising inflation and a strong dollar.