Jobless claims hit record low as employers embrace ‘low hire, low fire’ labor market

Considering all the recent high-profile layoffs at companies including Disney, Samsung, and Amazon, you’d think that jobless claims would be reaching new heights. However, the reality appears to be the opposite, according to the newest preliminary unemployment claims data from the Department of Labor.

Record low. Initial jobless claims fell to 187,000 for the week ending July 18, down 22,000 from the week prior, according to the DOL’s report. That’s the lowest level reported since 1969. Meanwhile, continuing jobless claims, which represent the number of people already receiving unemployment benefits, reached 1.86 million for the week ending July 4, up 64,843 from the week prior, but down by nearly 175,000 year over year.

As the labor market has cooled in recent years, and economic uncertainty has upended long-term business planning, employers have adopted a “low hire, low fire” mentality, avoiding drastically increasing and decreasing their headcounts. Fewer layoffs have meant fewer unemployment claims.

“I think it’s a healthy place for the labor market to be in, as companies don’t have enough of that outlook and confidence to hire aggressively, but they don’t also have the concerns to start laying off people,” Raj Namboothiry, SVP at Manpower US, told HR Brew. Employers are taking a “wait and watch mode, and they’re balancing it off pretty well,” he added.

Additionally, as the labor force participation rate has shrunk, so has the pool of available workers, making employers hesitant to conduct layoffs.

“Perhaps a shrinking labor force, driven by reduced immigration and the retirement of Baby Boomers, is encouraging businesses to hold on to their employees despite economic uncertainty,” John Min, chief economist at financial services firm Monex, wrote on LinkedIn, adding that the shrinking labor force could force the labor market to tighten further, creating wage spikes in the coming months.

Eye on uncertainty. Economic uncertainty, fueled by many factors including the US-Israeli war with Iran and elevated energy prices, continues to loom over employers’ talent strategies. Should these pressures persist, employers could be forced to cut costs and turn to layoffs.

Employers should prepare for multiple scenarios, including an improved or worsened economy, Namboothiry said. HR leaders in particular should focus on strategic areas including understanding and retaining employees with mission-critical roles and skills, leveraging different kinds of labor (including contingent workers), investing in AI to promote productivity, and leveraging workforce intelligence tools to better understand supply and demand in the labor market, he added.

“There’s going to be a lot of things coming. You have to be building plans for a continued softening of growth, or stronger recovery, or just mixed economic signals which we are seeing,” Namboothiry said. “That flexibility, that adaptiveness is going to be critical for employers.”