- Claims for unemployment benefits increased more than expected last week.
- Producer prices declined in March, suggesting that the economy is cooling off.
- The US Federal Reserve is still considering raising interest rates next month, despite the current situation.
The US Department of Labor report released Thursday showed the number of Americans filing new claims for unemployment benefits rose more than expected last week, further demonstrating that labor market conditions are improving. were gradually easing as higher borrowing costs reduce demand in the economy.
Other Labor Department data released that same day showed producer prices declined at the highest rate in nearly three years in March, suggesting momentum in the economy is slowing. However, the job market and inflation probably aren’t cooling fast enough to stop the US Federal Reserve from raising interest rates yet again next month.
Christopher Rupkey, the chief economist at FWDBONDS in New York, said, as reported by Reuters, that “Fed officials couldn’t ask for better data today, as it looks like the economy is finally running out of gas after a year of rising prices. rates… Fed officials thought the economy might slow down after the banking crisis and now it looks like the slowdown is happening.”
Initial claims for state unemployment benefits increased by 11,000 to 239,000 (seasonally adjusted) for the week ending April 8. Economists polled by Reuters had forecast 232,000 applications for the past week. Annual reviews of data released by the government last week showed that claims were much higher this year than previously estimated, lining up with a wave of high-profile layoffs in tech industries and other sectors. highly sensitive to interest rates.
Despite this, claims remain below the 270,000 level, a figure that economists say would signal a deterioration in the job market. Last Friday’s jobs report showed a slower but still strong pace of job growth in March.
Job openings fell below 10 million at the end of February for the first time in nearly two years. Still, there were 1.7 job openings for every unemployed person that month, which could make it easier for some laid-off workers to find a job.
The report also showed that the number of people receiving benefits after an initial week of aid, a proxy for hiring, fell by 13 billion to 1.81 billion during the week ending April 1, not far from record levels. prior to the pandemic.
Although the health of the labor market is expected to gradually deteriorate in the second quarter, economists do not foresee a sudden drop in demand that causes a severe recession. Still, financial markets are betting the Federal Reserve will raise rates another 25 basis points at its May 2-3 policy meeting, according to CME Group’s FedWatch tool, which could be the last rate hike. .
In addition to this, in a separate report on Thursday, the US Department of Labor reported that its producer price index (PPI) for final demand fell 0.5% in March, the most since April. 2020, after remaining unchanged in February. The 1.0% drop in goods prices accounted for two-thirds of the PPI decline, with gasoline prices falling 11.7% while food prices increased 0.6%. Services prices fell 0.3%, the biggest drop since April 2020. In the 12 months through March, the PPI rose 2.7%.
Economists forecast the PPI to remain unchanged for the month and rise 3.0% year-over-year. The PPI and CPI data suggest that the core Personal Consumption Expenditure (PCE) price index increased by 0.3% in March, matching the increase in February. The PCE data for March will be published at the end of this month.
In conclusion, economists do not foresee a sharp drop in demand and the US Federal Reserve is expected to raise interest rates at its next policy meeting in May. Additionally, producer prices declined at the highest rate in almost three years in March, suggesting momentum in the economy is slowing.
