The rise of jobless claims could be a side effect of inflation

Last week we observed a higher-than-expected rise in jobless claims.

The US labor market is still growing although the growth is not what we would describe as being rapid. The employment growth has become slow and layoffs have become more common, perhaps due to the high inflation at present.

However, we can not simply assume that the job market has stalled because job crosscurrents are progressing through the economy. As a result, there are many mixed messages about the future of the US labor market.

According to President Joe Biden, "We've created nearly 700,000 manufacturing jobs just in the last 19 months. Businesses are investing in America.”

However, the Federal Reserve has several tools to fight inflation, one of them being weakening the labor market. The Fed has repeatedly hiked interest rates with the same intent of fighting inflation. They believe that normal growth can get back on track once the labor market is weakened a little.

Federal Reserve Chairman Jerome Powell says that "We don't know… whether this process will lead to a recession or, if so, how significant that recession would be."

Big players including Salesforce, Oracle, Google, and Meta have announced hiring freezes and begun laying off employees. The scene is the same in the mortgages, real estate, and home building sectors where workers are being laid off continuously.

This could be a sign that inflation is affecting established businesses. Employment lawyer and former EDD Director Michael Bernick says that hiring freezes and layoffs in white-collar jobs are reasons that indicate an economic slowdown.

Even with all of this going on in the background, there are still openings in direct service jobs including supporting the elderly and disabled at home or in care centers, small businesses, home repair, and retail that have been vacant for a while now. Although wages have been raised, employers are still struggling to fill their positions with new workers.

Nationwide, there are over 10 million job postings, which is a much higher value than those seen before the pandemic. Bernick is unable to pinpoint a reason workers are scarce. He says, "Workers are slowly coming back, but it's still well below before the pandemic and I can't understand why, Most people I talk to can't understand why."

In the San Francisco area, the resistance of workers to permanently return to offices is higher. "We're still below 35% of occupancy today and on many days below 30%," stated Bernick.

The US inflation rate, at a percentage of 8.2, lies below the overall European rate. But this value is somewhat higher in comparison to other major nations including China, Japan, South Korea, Canada, and India.