New filings for jobless benefits last week inched down as a tight labor market kept layoffs below pre-pandemic levels.

There were 210,000 new filings for the week ending May 21, down 8,000 from the week before, according to Labor Department data released Thursday . The weekly average pre-pandemic in 2019 was 218,000.

The four-week moving average, however, increased despite last week’s drop, to 206,750, showing a continuing reversal of the short-term trend of the past month and a half.

With financial conditions and economic activities slowing down, that suggests new jobless claims—a proxy for job layoffs—might have reached their bottom.

Our preferred measure for longer-term trends—the 13-week moving average—also showed a slight increase in new claims from 186,000 in the second half of April to 188,000 last week.

Both indicators pointed to a likely reversal of the weekly layoff gauge, though by how much remains to be seen. There is no shortage of recent reports of layoffs and hiring freezes from public companies like Lyft, Robinhood or Carvana.

Yet it is still early to link those reports—mostly related to tech companies—to middle market firms that make up the real economy.

On the macroeconomic level, with more interest rate increases coming in June and July, labor demand will take a hit, lessening labor market tightness. That will most likely give room for layoffs to pick up.

The takeaway

Despite the weekly fluctuations, initial jobless claims has served well as an early indicator for sharp turns in economic conditions, especially regarding the labor market. It will be important to watch these claims closely in the next month or two to look for an early sign of changes.