The German economy may be showing signs of a life after more than half a decade of stagnation.
Europe’s largest economy has suffered a series of recent blows, including a surge in energy costs after Russia’s full-scale invasion of Ukraine, higher tariffs on its exports to the U.S and fierce competition from China in key sectors such as automobiles.
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Don Nico Forbes
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OTTAWA—Canada said Tuesday it intends to run wider deficits to finance spending and tax measures aimed at unleashing the massive private-sector investments the economy needs to rebuild amid a protectionist U.S.
To offset some of the elevated costs, Prime Minister Mark Carney’s government said it would cut the size of the federal public-sector workforce by about 5%, or 16,000 jobs.
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Toy maker Mattel Inc. on Wednesday reported fourth-quarter results that missed expectations, with the company saying it plans to cut costs this year while continuing to buy back stock.
The cost cuts would follow layoffs by rival Hasbro Inc.
HAS,
amid a slowdown in demand for toys. They also come as other companies over the past several weeks have announced layoffs and plans to tighten up expenses, as investors seek out bigger profit margins.
Shares of Mattel
MAT,
were up 1.5% after hours.
“Looking ahead, we are launching a new cost-savings program focused on profitable growth and expect to improve profitability and continue share repurchases in 2024,” Mattel Chief Financial Officer Anthony DiSilvestro said in the company’s earnings release.
Mattel — known for its Barbie and Hot Wheels toys and, increasingly, its efforts to turn them into content — reported fourth-quarter net income of $147.3 million, or 42 cents a share. That compares with net income of $16.1 million, or 4 cents a share, in the same quarter in 2022.
Adjusted for things like severance, product recalls and changes to deferred tax assets, Mattel earned 29 cents a share. Sales rose 16% to $1.62 billion.
Analysts polled by FactSet expected Mattel to report adjusted earnings per share of 31 cents, on revenue of $1.65 billion.
“Execution on our toy strategy was strong and we made meaningful progress in entertainment across film, television, digital and publishing,” Chief Executive Ynon Kreiz said in the company’s earnings release.
“We ended 2023 with the strongest balance sheet we have had in years, putting us in an excellent position to execute our strategy to grow Mattel’s IP-driven toy business and expand our entertainment offering,” he continued.
Mattel reported earnings after the key holiday-shopping season, and as analysts try to gauge the sales impact from the success of the “Barbie” movie released last summer. Mattel executives have said they want to make more films based on some of its other popular toys, and turn “Barbie” into a film franchise.
However, toy demand has been cooler recently, thanks to two years of inflation-fueled higher prices for goods and necessities. Retailers have taken a cautious approach toward stocking their shelves, after getting caught two years ago with too many toys and electronics that people didn’t want.
The Wall Street Journal reported this month that activist investor Barington Capital had taken a stake in Mattel, adding that Barington believed the company should consider “pursuing strategic alternatives” for its Fisher-Price and American Girl businesses.
Bank of America analysts on Tuesday said Mattel and Hasbro were among the companies that were “most at risk of direct impact” from shipping disruptions in the Red Sea. Yemen-based Houthi fighters opposed to Israel’s war in Gaza have attacked ships in the area, forcing lengthy detours and driving up shipping costs. Mattel, the analysts noted, got around 24% of its total sales from the Europe, Middle East and Africa regions in 2022.
During a conference in December, Kreiz said he believed in the long-term growth of the toy industry. But he said that after a jump in growth between 2019 and the pandemic, 2023 would likely be tamer.
“We believe 2023 will be back to normal in terms of shopping patterns and consumer behavior,” he said. “And also even inventory at the retail level and at our level is now reverting back to historical norms.”
Department-store chain Macy’s Inc. plans to cut 2,350 jobs and close five stores, the Wall Street Journal reported on Thursday, as the company tries to curb expenses and meet the demands of what it said was “an everchanging consumer and marketplace.”
The cuts, which amount to around 13% of Macy’s
M,
corporate staff and 3.5% of its staff overall, are part of an effort to shed costs, eliminate management layers and redirect spending toward improving customers’ shopping experience, the Journal said. The dismissals will begin on Jan. 26, according to a memo sent to employees cited by the publication.
“As we prepare to deploy a new strategy to meet the needs of an everchanging consumer and marketplace, we made the difficult decision to reduce our workforce by 3.5% to become a more streamlined company,” a Macy’s spokesperson said in a statement to MarketWatch.
The spokesperson said that the store closures were part of an effort to “reposition our store portfolio and evaluate the right mix of on- and off-mall locations,” adding that the five stores would close this year.
Shares of Macy’s were up 0.2% after hours on Thursday, after gaining 0.4% in the day’s trading.
The Journal reported that Macy’s plans to develop a more automated supply chain and would outsource some jobs. Citing a person familiar with the matter, the publication said the company would be “investing in areas that impact consumers, such as adding more visual-display managers to enhance the look of stores and upgrading digital functions to make online shopping more seamless.”
The job cuts were announced as the landscape for retailers remains uneven, as higher prices for groceries and other basics have hindered what inflation-hit shoppers can spend elsewhere.
“Despite our strong and tangible progress over the last few years, we remain under pressure,” according to the Macy’s memo cited by the Journal said.
The moves come as Macy’s President Tony Spring prepares to succeed the outgoing Jeff Gennette as the company’s chief executive next month. Macy’s is also facing a nearly $6 billion takeover bid by an investor group that’s looking to take the retailer private.
Shares of Nike Inc. tumbled after hours Thursday after the athletic-gear giant warned of a “softer second-half revenue outlook” on its quarterly earnings call, and said it is targeting up to $2 billion in cost cuts over the next three years as it looks to shed management and focus on women customers and its Jordan brand.
Nike
NKE,
said that the savings could come from simplifying its product selection and using more automation and technology. But the athletic-gear giant has also reportedly begun to lay workers off, and said it expected to book pre-tax restructuring charges of around $400 million to $450 million, much of it in the company’s fiscal third quarter, “primarily associated with employee-severance costs.”
Nike did not immediately respond to questions about job cuts at the company, or how many staff have been or could be laid off. But on the company’s earnings call, management said its plans included “reducing management layers.”
In Nike’s earnings release, Chief Financial Officer Matthew Friend said the company’s fiscal second quarter — in which per-share profit beat expectations while sales were roughly in line — marked “a turning point in driving more-profitable growth.”
But investors appeared skeptical after hours on Thursday, as shares slid more than 11%.
Nike announced the cost-cutting drive as clothing and shoe brands try to steer through weaker demand overall and a broader price-cutting battle in retail stores for inflation-battered customers. Those customers have had to set aside more money to cover the costs of ever-pricier essential goods, at the expense of things like sportswear and sneakers.
“We are seeing indications of more cautious consumer behavior around the world in an uneven macro environment,” Friend said during the call.
Nike executives said consumer demand was strong through the back-to-school season, Black Friday and Cyber Monday, but lagged in between. Demand wobbled online, and in China and Europe.
They also said that the money they planned to save would be reinvested into helping Nike become more nimble and more responsive to consumer preferences, after years of shifting away from selling shoes and gear through traditional retail chains in favor of doing business through its own stores and e-commerce channels. They added that those efforts “added complexity and inefficiencies” as competition grew steeper.
Chief Executive John Donahoe said on the call that the Nike-brand women’s segment was already a $9 billion business. But he said new products — like bras, leggings, retro-themed running shoes and other offerings that span both sports and lifestyle — would help draw more women customers.
Within the Jordan category, Donahoe cited opportunities beyond basketball sneakers. Clothing and golf-, soccer- and football-related products, along with offerings targeted toward women and children, would also help drive growth, he said.
But for the rest of its fiscal year, Nike’s expectations were dimmer. The company said it forecasted “slightly negative” sales growth for its fiscal third quarter. For its fourth quarter, executives expect low-single-digits sales gains. And they said they now anticipate Nike’s full-year sales to increase around 1%, compared to an outlook in September for mid-single-digits gains.
In its fiscal second quarter, which ended on Nov. 30, Nike reported net income in the period of $1.58 billion, or $1.03 a share, compared with $1.33 billion, or 85 cents a share, in the same quarter last year. Revenue rose 1% year over year, to $13.4 billion.
Analysts polled by FactSet expected adjusted earnings per share of 84 cents, on sales of $13.39 billion.
Gross margin rose to 44.6%, helped by price increases and lower costs for ocean-freight shipping.
Outlooks this year from athletic-gear retailers like Foot Locker Inc.
FL,
and Dick’s Sporting Goods Inc.
DKS,
have also been cautious, and Nike has faced competition from the likes of Adidas
ADDYY,
and On Running
ONON,
Nike management also said in their previous earnings call in September that they aimed to do more to attract women and running-shoe customers. However, they noted that demand for the company’s products remained solid and they were “cautiously planning for modest markdown improvements for the balance of the year,” as the company tightens up its supplies of sneakers and clothing in stock.
On Thursday’s call, executives said that demand for higher-priced products had been “resilient,” and that they didn’t have to cut prices as much as their rivals. And they said new releases — like the Sabrina 1 and Luka 2 sneakers — were the best way to stand out in a sea of discounts.
“We know in an environment like this, when the consumer is under pressure and the promotional activity is higher, that it’s newness and innovation which causes the consumer to act,” Friend said.
Updated Dec. 12, 2023 2:54 am ET
Nokia cut its operating margin guidance, with market conditions in its mobile networks business remaining challenging due to falling operator spending and the Indian market normalizing after a period of rapid 5G roll-outs.
The Finnish telecom equipment maker said Tuesday that it now targets a comparable operating margin target of at least 13% by 2026, from at least 14% previously.
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Hasbro Inc. is cutting about 900 jobs as the company is facing a slump in toy and game sales after a boom during the pandemic.
The cost-saving plan will result in “the reallocation of people and resources,” including early retirement for some employees and layoffs over the next two years, Hasbro
HAS,
said in a filing late Monday.
The Wall Street Journal reported the layoff plans earlier Monday, citing a memo it had viewed.
The maker of My Little Pony and Monopoly launched the plan in January, and at the time announced the layoffs of about 15% of its workforce.
It has booked about $94 million in expenses related to severance, stock compensation and employee benefits, and expects to book an additional $40 million, the company said in the filing Monday.
Hasbro in October missed third-quarter earnings expectations and slashed its full-year outlook, citing a “softer toy outlook.”
Shares of Hasbro and rival Mattel Inc.
MAT,
fell about 4% and 3%, respectively, in the extended session Monday, as the Wall Street Journal report also cited “early data points to another weak year” for the toy industry following the a boom during the pandemic.
Mattel in October reported a better-than-expected third quarter, thanks in part to its wildly successful Barbie movie.
Shares of Mattel have gained 6% this year, which contrasts with a 20% drop for Hasbro stock. Both stocks, however, have underperformed in relation to the S&P 500 index
SPX,
which is up about 20% in 2023.
In a February filing, Hasbro said it had about 6,500 employees worldwide as of the end of 2022.
Spotify Technology SA on Monday said it plans to reduce head count by 17%, which would mark the third time the audio streaming group has announced layoffs cuts this year.
The Wall Street Journal said the cuts would equate to about 1,500 jobs.
The move was announced by Chief Executive Officer Daniel Elk in a letter to employees that was posted on the company’s website.
“Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities,” he said, adding that the “painful” cuts were needed to align the company with “future goals and ensure we are right-sized for the challenges ahead.”
Spotify
SPOT,
previously announced 200 workers would be laid off in June and 600 workers in January.
Elk said that he realized the new reductions seem “surprisingly large, given the recent positive earnings report and the company’s performance” — shares have soared 128% in 2023.
Analysts have credited Spotify’s share performance this year to strong growth and improved profitability, but Citi downgraded the stock last week, saying risk-reward is no longer attractive.
“We debated making smaller reductions throughout 2024 and 2025. Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives,” he said.
Elk explained that in 2020 and 2021, Spotify took advantage of lower costs of capital and “invested significantly,” for example in expanding the company’s team and enhancing conent.
“These investments generally worked, contributing to Spotify’s increased output and the platform’s robust growth this past year. However, we now find ourselves in a very different environment. And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big,” he said.
The numbers: The U.S. economy expanded but at a relatively subdued pace in early November, latest data from S&P Global show.
The S&P Global “flash” U.S. services index rose to 50.8 in November from 50.6 in the prior month, the highest level in four months. Economists surveyed by the Wall Street Journal had forecast a reading of 50.2.
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With yet another blowout earnings report, Nvidia Corp. has ended an earnings recession in the U.S. and helped to solidify the continuation of a drastic change to corporate profits.
Nvidia NVDA on Tuesday rode enduring demand for hardware that is essential for artificial-intelligence tasks to yet another record quarter, as revenue tripled and profit zoomed more than 1,300% higher year over year. Nvidia recorded earnings of more than $9 billion in just three months, a total it had never achieved in a full year before 2022.
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By Adria Calatayud
Alstom plans to cut around 1,500 full-time equivalent positions and scrap its dividend as part of a cost-savings plan to reduce debt and boost profitability.
The French train maker said Wednesday that it is also considering equity and equity-like issuances, as well as a capital increase, among potential options to accelerate its debt-reduction plans.
Alstom’s measures are part of a plan that seeks to secure its mid-term profit and cash-generation targets and come after the company said last month that it burned cash in the six months to September.
The company also said it would overhaul its governance to improve accountability and financial discipline. Its board intends to propose former Safran Chief Executive Philippe Petitcolin as a director and then as chairman, separating the chair role from that of CEO. Henri Poupart-Lafarge will keep the CEO role, the company said.
Alstom said it is targeting a reduction of 2 billion euros ($2.18 billion) in its net debt by March 2025 and that it is considering a range of transactions to accelerate that effort. These include an asset-sale plan that has already been launched, with proceeds of up to EUR1 billion targeted, in addition to equity issues and a capital increase, it said.
As of March 2023, Alstom employed more than 80,000 people, according to its annual report.
Write to Adria Calatayud at adria.calatayud@dowjones.com
Virgin Galactic said it would cut jobs and expenses to focus on producing its lower-cost Delta spaceships.
Shares of Sleep Number Corp. tanked 30% in the after-hours session Tuesday after the mattress maker and retailer swung to a surprise quarterly loss, predicted a loss for the full year and said it reached an agreement with a shareholder that had been pushing for change.
It was a “challenging” quarter for Sleep Number
SNBR,
and the bedding industry, Chief Executive Shelly Ibach said. “The consumer demand trajectory changed abruptly midway through the quarter,” Ibach said.
Sleep Number “acted quickly to further reduce costs, recalibrate our sales and marketing approach, and amend our credit agreement to provide additional covenant flexibility through the end of 2024,” she said.
Sleep Number lost $2.32 million, or 10 cents a share, in the third quarter, versus earnings of $5 million, or 22 cents a share, in the year-ago quarter.
Revenue dropped 13% to $473 million, the company said.
Analysts polled by FactSet expected the company to earn 16 cents a share on sales of $509 million in the quarter.
Sleep Number also kicked off a plan to reduce costs in light of the lower demand. It hopes the plan will result in about $50 million less in operating expenses next year, the company said.
The cost-restructuring actions are “broad-based” and include layoffs as well as store closures, the company said.
The layoffs will occur “across all areas of the organization,” including in corporate and research and development, the company said. It plans to close 40 to 50 stores by the end of next year, and slow down the rate of new-store openings and remodels.
The restructuring will result in up to $20 million in one-time costs, with about $10 million of the costs falling in the fourth quarter, the company said.
Sleep Number also dialed back its 2023 EPS outlook, calling for a per-share loss of up to 70 cents, including the fourth-quarter restructuring charges.
That compares with a July guidance of 2023 EPS in a range between $1.25 and $1.75.
Separately, Sleep Number appointed Stephen E. Macadam and Hilary A. Schneider to its board, effective immediately, expanding the board to 12 people.
In conjunction with the appointments, Sleep Number entered into a cooperation agreement with shareholder Stadium Capital Management LLC.
As part of the agreement, the board has established a “capital allocation and value enhancement committee” to review capital use and investments, it said.
Independent director Michael J. Harrison said that the company was “grateful to have reached an agreement with Stadium Capital on a constructive path forward and are looking forward to working with Steve and Hilary toward our common goal of delivering long-term value for our shareholders.”
Stadium Capital, which owns about 9% of Sleep Number, published a letter in September criticizing the company, its executives, and the “abysmal” shareholder returns.
Shares of Sleep Number have lost 38% so far this year, contrasting with gains of about 14% for the S&P 500 index
SPX.
Nokia on Thursday set out plans to cut its workforce by up to 14,000 as it reported a steep drop in third-quarter profit.
The telecom equipment maker said it’s looking to reduce its workforce to between 72,000 and 77,000 workers, from 86,000 now, by the end of 2026. Nokia
NOKIA,
NOK,
said that could save the company as much as €1.2 billion ($1.3 billion), or up to 15% of personnel expenses.
“We continue to believe in the mid to long term attractiveness of our markets. Cloud Computing and AI revolutions will not materialize without significant investments in networks that have vastly improved capabilities. However, given the uncertain timing of the market recovery, we are now taking decisive action on three levels: strategic, operational and cost. I believe these actions will make us stronger and deliver significant value for our shareholders,” said Pekka Lundmark, president and chief executive, in a statement.
The company didn’t provide a regional breakdown of the job cuts but said it will “act quickly” as it targeted mobile networks, cloud and network services, as well as its corporate function, for cuts.
Nokia’s profit dropped by 69% to €133 million, or 2 cents a share, as revenue fell 20% to €4.98 billion. Analysts polled by Visible Alpha forecast earnings of €395 million on revenue of €5.66 billion.
Nokia shares dropped 4%, and have fallen by 28% this year.
In echoes of what rival Ericsson
ERIC.B,
said on Tuesday, Nokia said a slowdown in India’s 5G deployment could not offset the situation in North America.
Nokia said it’s tracking toward the lower end of its net sales range for 2023 and toward the mid-point of its comparable operating margin range.
By Ian Walker and Joe Hoppe
Rolls-Royce Holdings is set to cut 2,000-2,500 jobs worldwide as part of a transformation program and strategy review.
The U.K.-based aircraft engine manufacturer, which announced the review plan in January, said Tuesday that the new structure will create a more agile business better able to serve customers, and help it improve its capabilities in areas such as procurement and supply-chain management.
Rolls-Royce currently employs 42,000 people worldwide.
Write to Ian Walker at ian.walker@wsj.com and Joe Hoppe at joseph.hoppe@wsj.com
The U.S. unemployment rate jumped to an 18-month high of 3.8% in August. Does that mean the economy is tottering and layoffs are rising from near record lows? Ah, no.
The big increase in the jobless rate — from 3.5% in July — stemmed almost entirely from more people in the labor force.
People generally look for a job when they think it’s easy to find one and the pay is good. That’s a sign of a robust labor market, not a weakening one.
An estimated 736,000 people entered the labor force last month, but only about one-third found a job.
The other half million didn’t find a job right away, so they would be considered unemployed. The government includes anyone without a job who is actively searching for work in the unemployment rate.
Ergo, that’s why the jobless rate jumped three-tenths to 3.8%.
Digging a little deeper, the summer-jobs market for young people may have played an outsized role.
About 45% of the people who reportedly entered the labor force in August were between the ages of between 16 and 24 years old, noted Omair Sharif, president of Inflation Insights.
As it turns out, a similar 724,000 spike in the size of the labor force took place in August 2022. And once again it was driven by an increase in young jobseekers.
What’s going on? Young people working summer jobs may have simply stayed on a bit longer than the government’s employment survey could account for.
“This looks like an anomaly associated with the summer jobs market,” said chief economist Stephen Stanley of Santander Capital Markets.
What happened after August 2022? The size of the labor force fell or moved sideways for the next three months. The unemployment rate also declined.
If the same scenario plays out again this fall and the labor force shrinks, the unemployment rate could drop back down again in the next few months.
There also could be another, less positive, explanation for the large increase in the number of people seeking work in August. Maybe they need the spending money to keep their current standard of living in light of high inflation and the depletion of their Covid-era savings.
“This could also be a possible sign of stress, with households having to come back to the labor market to pay bills and maintain current spending habits,” said senior economist Sam Bullard of Wells Fargo.
The numbers: The U.S. added a more modest 187,000 new jobs in July, perhaps a sign the economy is cooling enough to drive inflation lower and even stave off further increases in interest rates.
Employment growth has fallen below 200,000 two months in a row for the first time since the onset of the pandemic in 2020.
The unemployment rate, meanwhile, dipped to 3.5% from 3.6%, the government said Friday.
After the report, stocks rose and bond yields fell.
Senior officials at the Federal Reserve will decide whether to raise interest rates again in September after reviewing a handful of reports on jobs, wages and inflation.
Scott Olson/Getty Images
Higher rates work to slow inflation by depressing the economy, but they also raise the risk of recession. The Fed is aiming to extinguish high inflation without triggering a downturn — what economists call a “soft landing.”
The good news? Inflation has slowed a bit faster than expected recently. Yet while the labor market appears to be cooling, a shortage of workers is keeping upward pressure on wages.
Wages rose 0.4% in July. The increase over the past 12 months was unchanged at 4.4%.
Fed officials want to see annual wage growth return to pre-pandemic levels of 3% or less.
The pace of hiring is also faster than the Fed would like. The economy probably only needs to add 100,000 jobs a month to absorb all the people entering the labor force in search of work, Fed officials said.
Key details: The increase in hiring in July was concentrated in just a handful of areas, mostly health care and social assistance.
Some 87,000 jobs — or 47% of July’s total — were created by medical providers and social programs.
Hiring also rose slightly in leisure and hospitality, finance, wholesale and government.
While the economy is still creating lots of new jobs, fewer industries are hiring. The percentage of firms adding jobs vs. the share reducing them fell close to a record low last month. That’s a sign the labor market is cooling off.
Hiring in June and May was also weaker than previously reported.
Job gains in June were reduced to 185,000 from 209,000, marking the smallest increase since the end of 2020.
The increase in employment in May was cut to 281,000 from 306,000.
Another sign of a softening labor market: The number of hours people work fell a tick to 34.3 and matched a post-pandemic low. Businesses tend to cut hours before resorting to layoffs when the economy slows.
The share of people working or looking for work, meanwhile, was unchanged at a post-pandemic high of 62.6%.
High labor-force participation can also help to reduce inflation. When more people are looking for work, companies don’t have to raise wages as much to obtain labor.
Big picture: Can the Fed really pull off a soft landing — something it’s only done once or twice since World War Two? Senior officials are increasingly convinced it’s doable.
The Fed economic staff recently dropped its forecast of a recession and a majority of Wall Street economists now say a downturn is unlikely in the next year.
The economy still isn’t out of danger, though. The Fed has raised interest rates to the highest level in a few decades and some key parts of the economy are suffering.
If progress on reducing inflation wanes and rates go even higher, the economy would be more vulnerable to a recession.
Looking ahead: “Today’s July jobs report is consistent with a soft landing in the U.S. economy,” said chief economist Gus Faucher of PNC Financial Services. “Job growth is gradually slowing to a more sustainable pace.”
“The July employment report should not change the Fed’s hawkish lean,” said Nationwide Chief Economist Kathy Bostjancic. “But officials will want to see the August employment report and the next two inflation monthly readings before deciding whether they can remain on hold or if further rate hikes are required to cool labor demand and inflationary pressures.”
Market reaction: The Dow Jones Industrial Average
DJIA
and S&P 500
SPX
were set to open higher in Friday trades. The yield on the 10-year Treasury BX:TMUBMUSD10Y fell to 4.1%.
Anheuser-Busch InBev is planning to cut jobs in the U.S. after a sharp deterioration in sales following a boycott that’s still impacting Bud Light.
The industry publication Brewbound said the company was going to cut 2% of its U.S. workforce, where it employs 19,000. The company told the publication that front-line workers, including warehouse staff and field reps, will not be impacted. The company did not specifically identify slumping Bud Light sales as the cause of the layoffs.
Bud Light sales have tumbled after the company’s ill-fated social media promotion with Dylan Mulvaney.
Citing Nielsen U.S. beer data, analysts at Bank of America said volumes at the brewer tumbled by 15.3% year-over-year in the four weeks ending July 15, compared to the 2.7% decline for the broader U.S. beer category.
Bud Light sales over that same time period skidded 29.8%, and Budweiser volumes skidded 14%. In contrast, Coors Light sales rose 17% in the last four weeks, Miller Lite volumes rose by 12.5% and Yuengling sales surged 38%.
Anheuser-Busch InBev’s U.S.-listed shares
BUD,
have dropped 2% this year. In its home market of Belgium, shares
ABI,
rose 0.6% on Thursday.
The numbers: The number of people who applied for U.S. unemployment benefits in early June jumped to a nearly two-year high of 261,000, but most of the increase took place in just two states: Ohio and California.
New jobless claims in the seven days ended June 3 climbed by 28,000 from the prior week, the Labor Department said Thursday. The figures are seasonally adjusted.
Layoffs rose early in the year and pushed jobless claims above 200,000, but until this week, Jobless claims has barely changed since the spring and indicated that layoffs remained low.
Key details: Of the 53 U.S. states and territories that report jobless claims, 27 showed an increase last week. The other 26 posted a decline.
Most of the increase was in California and Ohio. Minnesota also saw a sizable increase.
Actual or unadjusted claims surged by 6,345 in Ohio to 16,717 — an unusually large gain.
And they rose by 5,173 to 48,750 in California, the state with by far the largest number of jobless claims. That could reflect tech-related layoffs.
Yet lots of states, including California, have suffered from a flood of fraudulent claims since the pandemic. Massive fraud in Massachusetts, for instanced, skewed the national jobless claims totals from March through May.
Before seasonal adjustments, new U.S. jobless claims were a much smaller 219,391 last week. That was up from 208,856 in the prior week.
The Memorial Day holiday may have also influenced new filings. Some people either delay or accelerate their claims applications around a holiday.
The number of people collecting unemployment benefits in the U.S., meanwhile, fell by 37,000 to 1.76 million.
A gradual increase in these so-called continuing claims over the past year suggests it’s taking longer for people who lose their jobs to find new ones.
Big picture: Unemployment claims typically begin to rise when the economy is deteriorating and a recession is approaching. The latest increase could be a red flag, but it will take a series of higher readings to cement the case.
Still, the increase in claims could give the Federal Reserve more reason to “skip” another increase in U.S. interest rates when senior officials meet next week.
Wall Street widely expects the Fed to stay put to give it more time to evaluate the economy and gauge how quickly inflation is slowing after a series of rate hikes over the past year. The Fed hopes the labor market will cool off further and reduce the upward pressure on wages.
Looking ahead: “The latest reading reflects a holiday-shortened week, which ought to raise suspicions that the big move was more noise than signal,” said chief economist Stephen Stanley of Santander Capital Markets. “I am eager to see next week’s reading before I draw any conclusions.”
“Rising initial jobless claims is a classic leading indicator of a recession, but a one-week jump is too little data to call a trend,” said Bill Adams, chief economist at Comerica.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were narrowly mixed in Thursday trades.
Meta Platforms Inc. has started to execute on its latest round of layoffs, according to reports.
The third round of cuts is part of a plan that Meta
META,
Chief Executive Mark Zuckerberg announced in March in an effort to further slash costs at the social-media company. He said at the time that Meta would lay off about 10,000 workers while closing roughly 5,000 additional roles for which the company had yet to make hires.
The current rounds of cuts build on at least 11,000 layoffs that were announced last fall.
See more: Meta steadily rolls out 3-part round of layoffs
CNBC reported Wednesday that Meta employees in user experience, marketing and recruiting roles indicated they were affected by the current round of cuts.
Zuckerberg said in a March note to employees, which was also shared as a company blog post, that the company planned to make restructuring moves in its technology groups in late April before making changes to the business groups in late May.
Reuters reported that the latest layoffs mainly affect employees in non-engineering positions, part of Zuckerberg’s goal of boosting the ratio of engineers at Meta relative to other positions.
Don’t miss: Meta’s ‘outstanding’ stock rally can keep roaring, analyst says in upgrade
Meta declined to comment in response to a MarketWatch request for confirmation of the latest layoffs.
The company is in the midst of what Zuckerberg has dubbed a “year of efficiency,” which comes in response to investor concern last fall about high spending levels at the company alongside the backdrop of declining revenue. Meta has since become arguably the most aggressive of the largest public technology companies in its cost-cutting efforts.