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

Signage for a job fair is seen on 5th 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 increase from 21,000 to 218,000
  • Continuing 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 unemployment benefits rose unexpectedly last week, hitting a four-month high and potentially hinting at some cooling in demand for workers against a backdrop of tighter financial conditions.

Still, the labor market remains tight, as Thursday’s Labor Department report also showed the ranks of the unemployed were the smallest in nearly 52½ years in early May. Signs of falling labor demand were also evident in a survey by the Philadelphia Federal Reserve, showing a significant drop in employment levels and the average workweek at factories in the central region. Atlantic this month.

The Federal Reserve’s aggressive monetary policy stance in its fight against inflation triggered a stock market sell-off and pushed up US Treasury yields and the dollar. Several retailers, including Walmart Inc (WMT.N), cut their full-year profit forecasts this week, warning that inflation was cutting profits.

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“This will lead to slower job growth in the retail and e-commerce sectors,” said Bill Adams, chief economist at Comerica Bank in Dallas, Texas. “The stock market sell-off could dampen business sentiment and make some companies more cautious about hiring, especially those with negative cash flow and dependent on investor money to fund operations like many startups. “

Initial claims for state unemployment benefits rose from 21,000 to a seasonally adjusted 218,000 for the week ended May 14, the highest level since January. Economists polled by Reuters had forecast 200,000 applications for the past week.

There was a jump of 6,728 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 been flat since hitting a more than 53-year low of 166,000 in March. They fell from an all-time high of 6.137 million in early April 2020.

Unemployment benefit claims

Some economists have seen the surge in claims as the start of the labor market normalization process 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 misalignment between supply and demand generates steep wage increases that contribute to fueling overall inflation in the economy. The Fed has raised its key rate by 75 basis points since March. The US central bank is expected to raise the key rate by half a percentage point at each of its next meetings in June and July.

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

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

REDUCTION OF UNEMPLOYMENT CLASSES

Last week’s data covered the period the government surveyed employers for the non-farm payrolls portion of the May jobs report. Applications 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 ranks of the unemployed as of mid-May will shed more light on the state of job growth this month- this. Payrolls rose by 428,000 in April, the 12th consecutive month of job gains above 400,000.

The number of people receiving benefits after a first week of help fell by 25,000 to 1.317 million in the week ending May 7. This was the lowest level for so-called continuing claims since December 1969. Continuing claims tend to drop even as initial claims. because benefits have increased.

“One possible explanation for the recent combination of rising initial claims and continuing falling claims is that layoffs have increased, but people are still able to easily find other jobs,” said economist Daniel Silver. 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 of 2.6 in May from 17.6 in April. A value greater than zero indicates manufacturing growth in the region that spans eastern Pennsylvania, southern New Jersey, and Delaware. Read more

The survey’s factory employment measure fell to 25.5 from 41.4 in April. Its average work week indicator fell to 16.1 from 20.8 the previous month. Nearly 27% of companies surveyed reported an increase in their workforce, the lowest in a year and down from 42% in April. Those who reported no change in the number of employees reached 71%, the highest since December 2020. read more

Philadelphia

There was also disappointing news in the housing market.

Sales of existing homes 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 crisis, said the National Association of Realtors in a third report. Read more

As monthly sales fell for a third consecutive month, the median price of existing homes jumped 14.8% from a year earlier to a record $391,200 amid a persistent lack of inventory. With a 30-year fixed mortgage rate well above 5%, sales should continue their downward trend. Read more

Sales of existing houses
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Reporting by Lucia Mutikani Editing by Paul Simao

Our standards: The Thomson Reuters Trust Principles.

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