The US labor market continues to tighten; moderate increases in producer prices

An ‘Apply Now’ sign sits outside the new Faccia Brutta Bar Pallino seeking to hire employees on Newbury Street in Boston, Massachusetts, U.S., April 27, 2022. REUTERS/Brian Snyder

Join now for FREE unlimited access to Reuters.com

Register

  • Weekly jobless claims rise by 1,000 to 203,000
  • Continuing claims drop 44,000 to 1.343 million
  • Producer prices increase by 0.5% in April; up 11.0% year-on-year

WASHINGTON, May 12 (Reuters) – The number of Americans filing new claims for unemployment benefits rose unexpectedly last week to its highest level in three months, but there is no significant change in labor market conditions in a context of high demand for workers.

Thursday’s Labor Department report also showed the state’s jobless count was its lowest in more than 52 years as of the end of April. Companies, jostling to fill record positions, are raising wages, helping to keep inflation high.

“There is no change in the underlying message of a very tight labor market and employers unwilling to lay off existing workers in the face of extreme labor shortages,” said Conrad DeQuadros , senior economic adviser at Brean Capital in New York.

Join now for FREE unlimited access to Reuters.com

Register

Initial claims for state unemployment benefits rose by 1,000 to a seasonally adjusted 203,000 for the week ended May 7, the highest level since mid-February. Data from the previous week has been revised to show 2,000 more applications received than expected. Economists polled by Reuters had forecast 195,000 applications for the past week.

Claims have largely been flat since hitting a more than 53-year low of 166,000 in March. Economists blamed the second straight weekly increase on residual volatility in data around moving holidays like Easter, Passover and spring school holidays. Strong increases in filings in California, Virginia and Illinois offset a drop of 9,811 in New York.

Unemployment benefit claims

There were a record 11.5 million job openings on the last day of March, and nonfarm payrolls rose by 428,000 in April, the 12th consecutive month of job gains above 400,000 Claims fell from an all-time high of 6.137 million at the start of April 2020.

The number of people receiving benefits after a first week of help fell by 44,000 to 1.343 million in the week ending April 30. This was the lowest level for so-called continuous claims since January 1970.

Stocks on Wall Street traded mixed as the dollar appreciated against a basket of currencies. US Treasury prices soared.

LONG ROAD TO LOW INFLATION

The Federal Reserve last week raised its benchmark rate by half a percentage point, the biggest hike in 22 years, and said it would start cutting its bond holdings next month.

The U.S. central bank, which began raising rates in March, hopes to realign labor demand and supply and calm wages and inflation, while avoiding high unemployment and an economic slowdown. brutal or a recession.

Although inflation remains above the Fed’s 2% target, there are encouraging signs that it has probably peaked, at least when measured on an annual basis. Last year’s high inflation readings are disappearing from the calculation of annual inflation rates.

In another report on Thursday, the Labor Department said the producer price index for final demand rose 0.5% in April as gains in energy products slowed. This marked a sharp deceleration from March, when the PPI jumped 1.6%. April’s rise is in line with economists’ expectations.

Energy prices rose 1.7% after rising 6.4% in March. Food prices rose 1.5%. As a result, goods prices rose 1.3% after jumping 2.4% in March. The cost of services remained unchanged after jumping 1.2% in March. But energy prices have since accelerated as demand shifts back to services from goods, suggesting the monthly PPI will pick up in May.

In the 12 months to April, the PPI rose 11.0% after accelerating 11.5% in March.

“While inflation still looks strong, there are signs that we may have exceeded peak rates,” said Daniel Silver, an economist at JPMorgan in New York.

The slowdown in monthly producer price gains follows a similar trend in consumer prices last month. Data on Wednesday showed consumer prices posted their weakest rise in eight months in April. Annual consumer price inflation also slowed for the first time since last August. Read more

Producer prices excluding food, energy and market services rose 0.6% in April after rising 0.9% in March. In the 12 months to April, the so-called core PPI rose 6.9% after accelerating 7.1% in March. The rise in core producer prices followed a similar trend with the core CPI.

Inflation

But the components that go into the core personal consumption expenditure (PCE) price index, one of the main measures of inflation watched closely by Fed officials, have been weak over the past month. Portfolio management fees fell for a third straight month as equity markets sold off.

The cost of hospital care and physician services fell due to a reduction in Medicare payments to providers starting in April.

Prices for used motor vehicles remained stable. Although airline fares rose, they did not match the record increase in the CPI report.

Based on CPI and PPI data, economists estimate that the core price index rose about 0.2% in April after rising 0.3% for two consecutive months. That would slow the year-over-year increase to 4.7% from 5.2% in March.

“Still, slightly lower PCE inflation is unlikely to change the near-term path of Fed policy, and we continue to expect 50 basis point rate hikes at each of the next three meetings. “, said Veronica Clark, economist at Citigroup in New York.

Join now for FREE unlimited access to Reuters.com

Register

Reporting by Lucia Mutikani; Editing by Andrea Ricci, Chizu Nomiyama and Paul Simao

Our standards: The Thomson Reuters Trust Principles.

Richard L. Militello