US labor market in the spotlight as weekly jobless claims hit 4-month high

Signage for a job fair is seen on Fifth Avenue after the release of the jobs report in Manhattan, New York, U.S., September 3, 2021. REUTERS/Andrew Kelly

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  • Weekly jobless claims rise 21,000 to 218,000
  • Continued claims drop 25,000 to 1,317 million
  • Mid-Atlantic factory activity slows in May
  • Existing home sales fall 2.4% in April

WASHINGTON, May 19 (Reuters) – The number of Americans filing new claims for jobless benefits unexpectedly rose last week, hitting a four-month high and potentially hinting at some cooling in demand for workers amid tighter financial conditions.

Still, the job market remains tight as Thursday’s Labor Department report also showed jobless queues were the smallest in nearly 52 1/2 years in early May. Signs of declining labor demand were also evident in a survey by the Federal Reserve Bank of Philadelphia, which showed a decline in the proportion of businesses reporting higher levels of employment and average factory work in the region. of the mid-Atlantic this month.

The aggressive stance of the Federal Reserve’s monetary policy in its fight against inflation has caused a sell-off in the stock market and has boosted US Treasury and dollar yields. Several retailers, including Walmart Inc (WMT.N), lowered their full-year earnings forecasts this week and warned that inflation was eating into earnings.

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“This will lead to slower job growth in the retail and e-commerce industries,” said Bill Adams, chief economist at Comerica Bank in Dallas, Texas. “The stock market sell-off could affect business confidence and make some companies more cautious about hiring, especially those that are cash flow negative and rely on investor money to fund operations, such as many new Business”.

Initial claims for state jobless benefits rose 21,000 to a seasonally adjusted 218,000 for the week ending May 14, the highest level since January. Economists polled by Reuters had forecast 200,000 claims for the latest week.

There was a 6,728 increase in claims in Kentucky, while California reported an increase of 3,315. There were also notable gains in filings in Pennsylvania, Ohio, and Illinois.

Claims have largely stayed afloat since hitting a more than 53-year low of 166,000 in March. They have fallen from an all-time high of 6.137 million in early April 2020.

unemployment claims

Some economists saw the surge in claims as the beginning of the process of normalizing the labor market after the distortions caused by the COVID-19 pandemic. There were a record 11.5 million job openings at the end of March and an all-time high of 4.5 million people quitting their jobs.

The mismatch between supply and demand is leading to strong wage gains that help drive overall inflation in the economy. The Fed has raised its policy rate by 75 basis points since March. The US central bank is expected to raise the overnight interest rate by half a percentage point at each of its upcoming meetings in June and July.

“The tight labor market has likely caused employers to focus on employee retention, resulting in much lower than normal initial claims,” ​​said Isfar Munir, an economist at Citigroup in New York. “The increase we are seeing now could be just a first step towards normalizing labor markets.”

Stocks on Wall Street were trading largely higher. The dollar fell against a basket of currencies, while US Treasury prices rose.

UNEMPLOYMENT RANGES IN REDUCTION

Last week’s data covered the period during which the government surveyed employers for the nonfarm payrolls portion of the May employment report. Requests increased between the April and May survey period.

While that would imply a moderation in the pace of job growth this month, next week’s data on the jobless ranks in mid-May will shed more light on the state of job growth this month. Payrolls increased by 428,000 in April, the 12th straight month of job gains above 400,000.

The number of people receiving benefits after an initial week of aid fell 25,000 to 1.317 million during the week ending May 7. That was the lowest level for so-called continuing claims since December 1969. Continuing claims have been trending down even as initial claims because benefits have increased.

“One possible explanation for the recent mix of initial claims trending up and ongoing claims trending down is that layoffs have increased, but people can still easily find other jobs,” said Daniel Silver, an economist at JPMorgan in New York. .

In a separate report on Thursday, the Philadelphia Fed said its business conditions index fell to a two-year low reading of 2.6 in May from 17.6 in April. A reading above zero indicates growth in manufacturing in the region that covers eastern Pennsylvania, southern New Jersey and Delaware. read more

The survey’s measure of factory employment fell to 25.5 from 41.4 in April. Its gauge for the average workweek fell to 16.1 from 20.8 in the previous month. Nearly 27% of firms surveyed reported an increase in workers, the lowest in a year and down from 42% in April. Those reporting no change in the number of employees reached 71%, the highest level since December 2020. read more

Philadelphia Federal Reserve

There was also disappointing news in the real estate market.

Existing home sales fell 2.4% to a seasonally adjusted annual rate of 5.61 million units last month, the lowest level since June 2020, when sales rebounded from the coronavirus lockdown slump. said the National Association of Realtors in a third report. read more

While monthly sales declined for the third month in a row, the median existing home price soared 14.8% from a year earlier to an all-time high of $391,200 amid persistent inventory shortages. With the rate on a 30-year fixed-rate mortgage well above 5%, sales are likely to continue their downward trend. read more

(This story corrects the second paragraph to make it clear that the decline was in rate and not level)

Existing Home Sales
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Reporting by Lucia Mutikani Editing by Paul Simao

Our standards: the Thomson Reuters Trust Principles.

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