US unemployment claims rise as AI-driven tech layoffs continue to grow
Applications for unemployment benefits in the U.S. increased slightly last week after falling near multi-decade lows, signaling that layoffs remain limited despite a growing number of corporate job-cut announcements.
The Labor Department reported that initial claims for state unemployment benefits rose by 10,000 to a seasonally adjusted 200,000 for the week ended May 2. Economists surveyed by Bloomberg and Reuters had expected claims to come in around 205,000.
The increase partially reversed the previous week’s decline, but claims continue to remain at levels historically associated with a stable labor market.
Continuing claims fall to a two-year low
The number of Americans continuing to receive unemployment benefits after their initial week of aid declined by 10,000 to 1.766 million in the week ended April 25.
That marked the lowest level for continuing claims in two years and suggested unemployed workers are still finding jobs relatively quickly despite slower hiring across many industries.
Economists often view continuing claims as a proxy for hiring conditions because they reflect how long displaced workers remain unemployed.
The latest data reinforced the view that the U.S. labor market remains in what economists describe as a “low-hire, low-fire” environment.
Companies have generally avoided large-scale layoffs even as businesses remain cautious about expanding payrolls. Hiring activity has slowed significantly compared with the post-pandemic rebound period, but employers also appear reluctant to cut workers aggressively.
This dynamic has helped keep unemployment relatively low while moderating wage pressures and overall labor market volatility.
Tech layoffs continue despite stable claims data
The subdued level of unemployment claims comes even as high-profile companies including Meta Platforms and Nike have announced job cuts.
A separate report from Challenger, Gray and Christmas showed employers announced 83,387 job cuts in April, up 38% from March. However, the figure was still down 21% from the same month a year earlier.
Technology companies accounted for a large share of the announced layoffs, with artificial intelligence frequently cited as a reason for workforce reductions and restructuring.
Economists say the rapid adoption of artificial intelligence is beginning to reshape employment trends across the technology sector and beyond.
Some analysts believe unemployment claims have remained low partly because many laid-off tech workers received generous severance packages that delayed benefit filings.
At the same time, businesses remain cautious about hiring as they evaluate how AI could alter staffing needs and productivity over the longer term.
Job openings stabilize while hiring improves
Separate Labor Department data released earlier in the week showed job openings were essentially unchanged in March.
Employers posted 6.87 million available positions in March, compared with 6.92 million in February. Although openings remained subdued compared with the post-pandemic peak, hiring activity improved notably.
Employers added 5.55 million gross jobs during March, the highest level since February 2024. More workers also voluntarily quit their jobs, a sign economists often interpret as confidence in employment prospects.
Government data showed there were 0.95 job openings for every unemployed worker in March, up from 0.91 in February.
The increase suggested labor demand stabilized after weakening in recent months and supported the view that the labor market remains balanced rather than sharply deteriorating.
A Conference Board survey also showed fewer consumers believed jobs were “hard to get” in April, while the share describing jobs as “plentiful” changed little.
April payrolls report expected to show slower hiring
Attention now shifts to the Labor Department’s April employment report due Friday.
Economists surveyed by Reuters expect nonfarm payrolls increased by 62,000 jobs in April following a 178,000 gain in March. A separate FactSet survey projected payroll growth closer to 57,000 jobs.
While slower than earlier in the year, economists note that the expected pace of hiring would still likely exceed the level needed to keep unemployment from rising significantly.
Several economists argue the economy now requires fewer monthly job gains to maintain a stable unemployment rate because labor force growth has slowed.
Partly due to tighter immigration policies, fewer workers are entering the labor market, reducing the number of jobs needed to absorb population growth.
Economists estimate the current “break-even” hiring pace may range between zero and 50,000 jobs per month, significantly below historical norms. An updated estimate from the Federal Reserve Bank of St. Louis suggested the threshold could be as low as 15,000 monthly jobs.
Unemployment rate expected to remain steady
Forecasters expect the unemployment rate to hold at 4.3% in April, though some economists believe the figure could round down to 4.2%.
The Chicago Federal Reserve projected an unemployment rate of 4.23%, which would mathematically round lower.
Despite slowing job growth, the unemployment rate has remained relatively stable as labor force expansion moderates and layoffs stay subdued.
Economists continue to warn that geopolitical tensions and rising energy costs could eventually weaken the labor market outlook.
Although there is little evidence so far that the geopolitical tensions has significantly affected employment, disruptions in the Strait have raised concerns about higher commodity prices and supply chain pressures.
Analysts say sustained oil prices above $100 per barrel could contribute to higher inflation, tighter financial conditions and slower global growth.
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14 essential strategies to maximize your Social Security and avoid costly mistakes
Social Security is a vital lifeline for many seniors, providing crucial income support during retirement. With inflation at its highest in four decades, Social Security’s inflation-adjusted benefits offer protection against rising costs.
Rising interest rates have disrupted many retirement portfolios, causing bond fund values to plummet. In this volatile financial landscape, Social Security can stabilize a typical stock-bond retirement portfolio. By implementing smart strategies, retirees can maximize their Social Security benefits and ensure a more secure financial future.
14 Essential Strategies to Maximize Your Social Security and Avoid Costly Mistakes
11 reasons you should claim Social Security early
Deciding when to claim Social Security is often about maximizing your benefit. Financial planners usually advise delaying your claim for as long as possible to secure the highest monthly payment. Your benefit is based on your lifetime earnings, with a full payout available at your full retirement age (FRA), which is currently between 66 and 67 depending on your birth year. Claiming before FRA results in a permanent reduction in your monthly benefit, while waiting beyond FRA leads to a permanent increase. However, the decision isn’t solely about maximizing the monthly check. Personal factors such as health, family circumstances, and financial needs can play a significant role in determining the right time to claim.
11 Reasons You Should Claim Social Security Early
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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