Do Jobless Claims Show Signs of a Cooling Labor Market?

For the first time since January, new jobless claims hit an average stride that topped pre-pandemic levels. That could have implications for office real estate.

As multiple outlets noted, initial jobless claims, which are often seen as an indicator of layoffs and firings, were up to 229,000 for the week ending June 4, a jump of 27,000 from the previous week’s revised levels of 202,000.

The four-week moving average, a statistical technique to smooth data and better see trends, hit 215,000, up 8,000 from the previous week. 

All that represents seasonally adjusted numbers. Economists massage figures, taking previous history into account, to try and better represent patterns in data. Non-seasonally adjusted (NSA) numbers typically have bigger swings but can be good to examine.

The Department of Labor also releases some NSA figures. For the week ending June 4, initial unemployment claims were 184,604 versus 183,596 for the week ending May 28. There is no released NSA moving average figure, but it could well be less than the 215,000.

There are other potential indicators, like layoffs, particularly in high tech. The site Layoffs.fyi pointed to 21 US tech startups with significant funding that had announced layoffs. Larger cap tech stocks have also shed jobs—at least 10 companies according to Insider Monkey, including such names as Netflix, Meta (formerly Facebook), Tesla, Uber, and PayPal.

Job gains in May were strong—19% higher than expectations—with areas of notable increases in leisure and hospitality, professional and business services, and transportation and warehousing. But all this was below the average monthly job growth rate of the past year, according to the Wall Street Journal. That said, job growth rates eventually should slow as an economic recovery happens, and as other government numbers suggest, there are far too few people working than there are jobs being offered.

Also, the layoffs and even worry about a potential recession don’t necessarily mean that the labor market will suddenly go soft. As Julia Pollak, chief economist at the job-search site ZipRecruiter, told CNBC “the broad picture is one of a vibrant and dynamic labor market, where there are 63% more job openings compared to pre-pandemic levels.”

In other words, it’s unclear at the moment that the labor market is really slowing, or if a few signs might receive too much attention and interpretation.

If labor markets are cooling, the stated desire of so many corporations to have people come back into the office might hold sway and improve traditional office occupancy. If the job market begins to favor employers more than employees, companies could have more leverage to demand people come back into headquarters, moving everyone away from hybrid work.