- Weekly jobless claims rise by 13,000 to 242,000
- Continuing claims drop 38,000 to 1.805 million
- Productivity falls at a rate of 2.7% in the first quarter
WASHINGTON, May 4 (Reuters) – The number of Americans filing new claims for unemployment benefits increased last week as the labor market gradually eases amid rising interest rates, which is slowing the demand in the economy.
But borrowing costs could remain elevated for some time, with further data Thursday showing labor costs jumped in the first quarter as worker productivity slumped.
The Federal Reserve on Wednesday raised its benchmark overnight interest rate an additional 25 basis points to the 5.00%-5.25% range and signaled that it may pause further hikes, although that it has retained a warmongering bias. The Fed has raised its key rate by 500 basis points since March 2022.
“Labour markets continue to experience exceptionally tight conditions, but the now sustained increase in demand and the potential continuation of the upward trend resulting from the spread of layoff announcements could be the first steps on the way to a more balanced labor market,” said Stuart Hoffman, senior economic adviser at PNC Financial in Pittsburgh, Pennsylvania.
Initial claims for state unemployment benefits rose 13,000 to a seasonally adjusted 242,000 for the week ended April 29. Economists polled by Reuters had forecast 240,000 claims for the past week. Unadjusted claims fell from 5,518 to 219,619 last week.
There was an increase in filings in Kentucky and Massachusetts as well as a notable gain in California, which offset a drop of 9,358 in New York as claims increased in the state following the holidays spring has been cancelled.
Claims have remained stuck at the upper end of their range of 194,000 to 247,000 this year, reflecting an increase in layoffs as the lagged and cumulative effects of the central bank’s fastest interest rate hike campaign since the 1980s are beginning to make themselves felt beyond the housing market and technology sector.
Nevertheless, the labor market remains tight. There were 1.6 job vacancies for every unemployed person in March, the government reported on Tuesday, well above the 1.0 to 1.2 range that economists say is consistent with a labor market which does not generate too much inflation.
Fed Chairman Jerome Powell told a news conference on Wednesday that “the labor market remains very tight” but noted that there were “some signs that supply and demand in the labor market return to a better balance”.
The number of people receiving benefits after a first week of help, a proxy indicator of employment, fell by 38,000 to 1.805 million in the week ending April 22, according to the claims report. It’s the biggest drop in so-called continuing claims since last July, suggesting that some of the laid-off workers are quickly finding jobs.
Stocks on Wall Street were trading lower. The dollar appreciated against a basket of currencies. US Treasury prices fell.
LAID-OFFS ON THE RISE
The claims report has no bearing on the government’s closely watched jobs report for April, which is due out on Friday, as it falls outside the survey period.
Nonfarm payrolls likely rose by 180,000 jobs last month after rising 236,000 in March, according to a Reuters survey of economists. The jobless rate is expected to have climbed to 3.6% from 3.5% in March.
A separate report from global outplacement firm Challenger, Gray & Christmas showed on Thursday that US-based employers announced 66,995 job cuts in April, down 25% from March. Layoffs, however, jumped 176% from April last year.
Although the labor market is easing, which could contribute to slowing wage growth, the drop in worker productivity should maintain strong inflationary pressures.
Non-farm productivity, which measures hourly output per worker, fell at an annualized rate of 2.7% in the first quarter after rising at a 1.6% pace in the October-December period, Thursday said. the Department of Labor in another report.
Economists had forecast that productivity would decline at a rate of 1.8%. It fell at a pace of 0.9% from a year ago, marking the fifth quarter of year-on-year decline in productivity, the longest such period since the start of the series in 1948.
During the current business cycle, beginning in the fourth quarter of 2019, labor productivity grew at an annual rate of 1.1%, which the Department of Labor’s Bureau of Labor Statistics, which produces the report, described. as “a historically low rate of productivity growth”. “
The BLS noted that “no other previous business cycle has seen weaker productivity growth, except for the brief six-quarter cycle from the first quarter of 1980 to the third quarter of 1981, which showed growth of 1.0%”.
Unit labor costs – the price of labor per unit of output – jumped at a 6.3% rate after rising at a 3.3% pace in the fourth quarter. Unit labor costs increased by 5.8% compared to a year ago. Labor costs are rising too quickly to be consistent with the Fed’s 2% inflation target.
“The Fed’s potential rate pause is entirely dependent on further progress being made in reducing inflationary pressures,” said Sal Guatieri, senior economist at BMO Capital Markets in Toronto. “Today’s report marked the exact opposite.”
Reporting by Lucia Mutikani; Editing by Paul Simao
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