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July 3, 2019 Blog 1 min read
The economy has slowed. Uncertainty remains the watchword on the trade front. And yet, layoffs remain exceptionally low, thus far virtually unscathed by it all.

7319 Jobless Claims Chart

Initial claims for Americans applying for first-time unemployment insurance fell by 8,000 to 221,000 for the week ended June 29, coming in below expectations for 223,000. Claims for the prior week were revised moderately higher 229,000. The four-week moving average of jobless claims, which can help to smooth week-to-week volatility, edged slightly higher to 221,750.

Most data had been pointing to a slowdown in the economy in recent months, but the May jobs report was still a surprise – and not for anything positive. Job creation slowed considerably in May, and revisions to the preceding two months effectively wiped out that moderate gain.

The labor market had been a bright spot for the economy for much of the past decade, even when growth seemed inexorably mired at around 2%. Any sign of weakness in job creation was sure to get attention. And it did.

As a result, the June jobs report is one to watch, either for confirmation of a more sustained slowdown in payroll growth or reassurance that May was an anomaly.

In the meantime, the fact that jobless claims not only remain low by historical measures, but have shown little indication of any meaningful pickup in layoffs, should alleviate some of the near-term concerns about labor market conditions.

Hiring may in fact slow, as much due to the increasingly tight labor market conditions and the difficulty in finding qualified candidates as anything. Yes, various measures of confidence have dipped, and uncertainty around trade policy and both the threat and reality of tariffs create additional challenges and cost for many businesses. But that probably doesn’t tell the whole story on payrolls.

Job openings still outstrip the ranks of the unemployed, indicating that the slowdown in the pace of hiring may have as much to do with a lack of labor supply than a lack of hiring demand.

Whether or not the slowdown in job creation, the slowing economy, and the dark clouds of uncertainty come together as catalysts for businesses to start to trim payrolls more aggressively remains to be seen. It’s a risk, but it hasn’t happened yet.

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