The U.S. Department of Labor reported Thursday that Americans filing applications for unemployment benefits unexpectedly rose last week. This is on the heels of the May jobs report, which indicated a significant drop in hiring from prior months. The back-to-back government reports reflect the possibility of a slowdown of the so-called red-hot job market.
The aforementioned reference is due to my continued doubt about the overall ebullience of the much-touted, record-level of high employment. My skepticism stems from the low labor participation rate, which indicates that people have given up searching for a new job—like those forced into involuntary early retirement—and are no longer counted by the government data. The gig economy distorts the rosy numbers by including millions of people who are underemployed and taking up certain jobs beneath their education, skills and abilities, as a last resort. The relocation of jobs to lower-cost states counts the number of new people hired, but ignores the lower salaries paid to them. Similarly, the resulting loss in jobs of well-paid personnel who then are pushed into accepting jobs beneath their experience and prior compensation are ignored by the media.
Economists predicted a decrease in claims for unemployment benefits to 216,000. However, initial claims for state unemployment benefits rose by 3,000 to 222,000 for the week ended June 8. These experts misread the job market, which only added a meager 75,000 new jobs in May—significantly lower than the 180,000 they predicted.
To offer some color on the layoffs, recently, an array of big-name corporations announced organizational restructuring. This included IBM letting go of 1,700 employees, in an effort to slash headcount and streamline the business in response to a possible major acquisition. Ford Motor Co. announced that 7,000 employees will lose their jobs as part of a major global reorganization, of which will include U.S. workers. Top tech companies in Silicon Valley have shed over 1,312 employees, according to the Employment Development Department. Those companies include PayPal, Oracle and SAP America. Media companies have been hit hard and downsized over 2,900 people this year. Casino company MGM Resorts International expects to reduce headcount by about 1,000 to reduce costs and boost earnings.
In addition to the disappointing number of jobs created in May, wages increased at their slowest yearly pace in eight months. Although jobless claims are at near historical lows, signs of economic softness are starting to show in sectors such as manufacturing and retail.