Representative image (Source: AP)
The number of Americans filing new claims for unemployment benefits fell last week, consistent with a labor market that remains tight amid strong demand for workers despite rising interest rates and tightening financial conditions.
Initial claims for state unemployment benefits decreased 8,000 to a seasonally adjusted 210,000 for the week ended May 21, the Labor Department said on Thursday. The decline partially unwound some of the prior week’s surge, which had pushed claims to their highest level since January.
Economists polled by Reuters had forecast 215,000 applications for the latest week. Some blamed the recent increase in applications to less generous seasonal factors in May, the model that the government uses to strip out seasonal fluctuations from the data, relative to the prior two months.
Others, however, believed some retailers were laying off workers. Several retailers, including Walmart Inc, last week cut their full-year earnings forecasts, warning that inflation was squeezing profits.
The Federal Reserve has raised its policy interest rate by 75 basis points since March. The U.S. central bank is expected to hike the overnight rate by half a percentage point at each of its next meetings in June and July. That has led to a sharp sell-off on the stock market and a surge in Treasury yields and the dollar.
But with a record 11.5 million job openings at the end of March, layoffs are likely to be minimal and people who lose a job can easily find another one. Claims are down from an all-time high of 6.137 million in early April 2020.
Minutes of the Fed’s May 3-4 meeting published on Wednesday showed officials commenting that “demand for labor continued to outstrip available supply across many parts of the economy and that their business contacts continued to report difficulties in hiring and retaining workers.” Many expected the labor market to remain tight and wage pressures to stay elevated for some time.
Higher wages, though they are trailing inflation, are helping consumers to keep spending and supporting the economy.
In a separate report on Thursday, the Commerce Department confirmed the economy contracted in the first quarter under the weight of a record trade deficit and a slightly slower pace of inventory accumulation compared to the fourth quarter.
Gross domestic product fell at a 1.5 annualized rate last quarter, the government said in its second GDP estimate. That was revised down from the 1.4 percent pace of decline reported in April. The economy grew at a robust 6.9 percent pace in the fourth quarter.
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