Mystery Economic Theater: Remember the summer spike in layoffs that pointed to a U.S. recession? It didn’t happen.

by | Sep 27, 2022 | Stock Market

When layoffs surged in the spring and summer, the U.S. economy showed early warning signs of recession. Except, it turns out, there was no surge in unemployment. What’s to blame for the mistaken impression of rising job losses? It’s not a sexy or dramatic answer, but the culprit is the government’s faulty “recipe” for calculating the number of layoffs.

It’s a problem that’s cropped up repeatedly on critical reports on hiring, job losses, U.S. growth and other snapshots of the economy. More on that later. At the time, however, no one could be faulted for thinking the worse. The number of people applying for unemployment benefits jumped to a nine-month high of 261,000 by July from a 54-year low of 166,000 in March. The increase in new claims was accompanied by a rising number of reported layoffs by companies such as Ford
and Peloton
Technology giants such as Facebook
and Google
also signaled plans to reduce or even freeze hiring. To top it off, the Federal Reserve had just raised a key U.S. interest rate for the first time since 2018 to try to slow the economy and squelch high inflation, a strategy bound to throw more people out of work.

People attend the Mega Job Fair in Florida, where hundreds of companies sought to fill thousands of open positions. Even though the U.S. economy has slowed, businesses are still hiring.

Joe Raedle/Getty Images

Typically a large increase in new jobless benefit claims in such a short period foreshadows a softening economy — if not outright recession. The problem is, the government’s approach to calculating jobless claims got it wrong. There really wasn’t a big wave of people losing their jobs. “The bigger picture here is the feared surge in layoffs earlier in the summer just didn’t happen,” said chief economist Ian Sheperson of Pantheon Macroeconomics.  The now-mysterious surge in new claims, it turns …

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