By Lucia Mutikani
WASHINGTON (Reuters) – The number of Americans filing new claims for jobless benefits fell last week as labor market conditions remained tight, though a slowdown is emerging amid high inflation and rising rates. of interest.
Despite the second straight weekly drop reported by the Labor Department on Thursday, claims hover near a five-month high. There have been job cuts in sectors such as technology and housing amid fears of a recession as the Federal Reserve aggressively tightens monetary policy to quell price pressures.
“The best days of the labor market are behind us,” said Christopher Rupkey, chief economist at FWDBONDS in New York.
Initial claims for state jobless benefits fell 2,000 to a seasonally adjusted 229,000 for the week ending June 18. Economists polled by Reuters had forecast 227,000 claims for the latest week. Claims have been buoyant since falling to a more than 53-year low of 166,000 in March.
While agreeing that there has been a loss of momentum in the labor market, some economists also blamed the stalling in claims on problems with the model used to remove seasonal fluctuations from the data.
“The recent upward trend in seasonally adjusted data is primarily because unadjusted filings have not decreased as much as seasonal factors anticipated. Pre-seasonally adjusted filings have remained very low in recent weeks,” said Daniel Silver. , an economist at JPMorgan in New York. York.
Unadjusted claims fell 3,255 to 202,844 last week. Illinois and Florida saw large declines in claims, which helped offset a notable increase in Michigan.
The overall labor market remains tight. There were 11.4 million job vacancies at the end of April, with nearly two vacancies for every one unemployed. But with increasing reports of companies freezing hiring and withdrawing job postings, job openings are trending down.
Stocks on Wall Street were mostly lower. The dollar advanced against a basket of currencies. US Treasury prices rose.
Despite the lack of progress, applications are at the average level seen in 2019. Economists say they would need to pass the 250,000 mark on a sustained basis to raise an alarm.
“There is nothing obvious here that points to a weakening of the labor market,” said Isfar Munir, an economist at Citigroup in New York. “While anecdotal evidence suggests that more companies are laying off people, especially tech companies, the hard data remains to be seen, and even when it does, it’s unlikely to be big enough to change the current narrative.”
Last week, the US central bank raised its benchmark rate by three-quarters of a percentage point, its biggest increase since 1994. The Fed raised its overnight benchmark rate by 150 basis points since March.
Fed Chairman Jerome Powell told lawmakers the labor market was “somewhat unsustainably hot.”
Recent data for retail sales, housing and manufacturing suggest the economy is slowing after appearing to have recovered from a first-quarter slump, which was mainly driven by a record trade deficit.
That was bolstered by an S&P Global survey on Thursday that showed its US composite PMI output index, which tracks the manufacturing and services sectors, fell to 51.2 in June from a final reading of 53.6 in May.
A reading above 50 indicates growth in the private sector. Its Flash Composite Orders Index fell to 47.4, the first contraction since July 2020, from 54.9 in May.
Manufacturing activity in the region encompassing the western third of Missouri, Kansas, Colorado, Nebraska, Oklahoma, Wyoming and the northern half of New Mexico slowed further this month, a third Kansas City Fed report showed.
Some manufacturers said they were “expecting a big decline in sales in the last half of the year,” also noting that “it appears our customers have overordered and are overstocked.”
short term supply.
Last week’s claims data covered the period during which the government surveyed establishments for the nonfarm payrolls component of the June employment report. Applications increased moderately between the May and June survey periods.
The economy added 390,000 jobs in May. The claims report also showed that the number of people receiving benefits after an initial week of help rose from 5 billion to 1.315 million during the week ending June 11.
Next week’s data on so-called continuing claims, a proxy indicator of hiring, will shed more light on June’s jobs report. Employment is 822,000 below its pre-pandemic level, a gap economists expect to close in the coming months.
“New filings increased between the May and June payroll benchmark weeks, suggesting job growth continued to moderate,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania. “This is what the Fed wants, as it wants the economy to cool down.”
(Reporting by Lucia Mutikani; Editing by Nick Zieminski, Paul Simao and David Gregorio)