Even as the number of non-farm payroll jobs increased last month, unemployment increased. According to personal finance website WalletHub, new unemployment claims reached the highest level since October 2021 as May ended.
After the U.S. managed to bring unemployment down from record highs, why is it going up again?
“Some large organizations over-hire when times are good, which makes it not that hard to shed talent when they want to cut cost,” said Rochelle Parks-Yancy a professor of management at Texas Southern University’s Jesse H.
Jones School of Business. “Those TikToks about ‘A Day in the Life in Tech’ essentially showed employees doing everything but working, which provided anecdotal evidence of over-hiring.”
Additionally, one of the Federal Reserve Bank’s goals has been to slow job growth. This is part of its plan to bring down high inflation by slowing down the economy.
“The Fed’s method of raising interest rates to slow down an overstimulated economy doesn’t always produce results that are good for workers, economists say,” according to TIME. Robert Reich, former U.S. Secretary of Labor in the Clinton Administration, told the outlet that this approach is “breaking down” and fails to address other issues that impact inflation.
“As the Federal Reserve tries to introduce more slack into the labor market, they have to consider that someone else might be willing to work for less or under less desirable conditions,” said Elaine McCrate, associate professor of Economics and Women's and Gender Studies at the University of Vermont, as cited by WalletHub. “We are still a long way from a more balanced institutionalized power relationship in which unions play an essential role.”
WalletHub said that new unemployment claims increased by 12% week-over-week on May 29. It estimated that currently 6.1 million Americans are currently unemployed. Here are the states that had higher claims than the previous week: Nebraska, Virginia, Kansas, West Virginia, Nevada, Illinois, Hawaii, Louisiana, Montana, Wisconsin, South Carolina, Arkansas, Idaho, Indiana, Delaware, California, New Mexico, Iowa, Kentucky, Tennessee, Pennsylvania, Massachusetts, North Dakota, Ohio and Minnesota.
It seems that the Fed plans to slow down its interest rate hikes (there have 10 recent increases) in the wake of these labor conditions, according to an Associated Press report. Board members of the bank are expected to meet next week.
“My predictions for the rest of 2023 hinge on Fed policy,” said Daniel Marburger, a clinical professor in the Department of Economics at Arizona State University. “If the Fed announces a pause on raising interest rates, then the odds increase of a soft landing. If not, I can see a mild recession in the future.”
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