The US labor market remains tight; slowdown in business activity
- Weekly jobless claims fall by 2,000 to 229,000
- Continuing claims rise by 5,000 to 1.315 million
- Activity slowed down in June; new orders fall
WASHINGTON, June 23 (Reuters) – The number of Americans filing new claims for unemployment benefits fell slightly last week as labor market conditions remained tight, although a slowdown looms amid rising inflation high and rising interest rates.
Despite the second straight weekly drop reported by the Labor Department on Thursday, claims are near a five-month high. There have been job cuts in sectors like technology and housing amid fears of a recession as the Federal Reserve aggressively tightens monetary policy to ease price pressures.
“The labor market’s best days are behind it,” said Christopher Rupkey, chief economist at FWDBONDS in New York.
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Initial claims for state unemployment benefits fell from 2,000 to a seasonally adjusted 229,000 for the week ended June 18. Economists polled by Reuters had forecast 227,000 claims for the past week. Claims have stalled since dropping to more than 166,000 in March, a more than 53-year low.
While agreeing that there has been a loss of momentum in the job market, some economists have also blamed the slowdown in claim growth on problems with the model used to remove seasonal fluctuations from the data.
“The recent upward trend in seasonally adjusted data has occurred primarily because unadjusted filings have not declined as much as seasonal factors had predicted. Pre-seasonally adjusted filings have remained very low in recent weeks,” said said Daniel Silver, an economist at JPMorgan in New York. York.
Unadjusted claims fell by 3,255 to 202,844 last week. Illinois and Florida saw sharp 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 unemployed person. But with increasing reports of companies freezing hiring and pulling job postings, job postings are expected to drop.
Stocks on Wall Street were mostly down. The dollar rose against a basket of currencies. US Treasury prices rose.
Despite the lack of progress, claims are at the average level seen in 2019. Economists say they would need to top the 250,000 mark on a sustained basis to sound the alarm.
“There’s nothing obvious here that points to a weakening labor market,” said Isfar Munir, an economist at Citigroup in New York. “While anecdotal evidence suggests that more companies are laying off workers, especially technology companies, that remains to be seen in the hard data, and even if so, it is unlikely to be significant enough to change the current narrative.
The U.S. central bank last week raised its key rate by three-quarters of a percentage point, its largest hike since 1994. The Fed has raised its overnight rate by 150 basis points since March.
Fed Chairman Jerome Powell told lawmakers the labor market was “kind of unsustainable.”
Recent data on retail sales, housing and manufacturing suggest the economy is losing steam after appearing to rebound from the first quarter slump, which was mainly driven by a record trade deficit.
This was reinforced by a survey from S&P Global on Thursday showing that its flash U.S. composite PMI production index, which tracks the manufacturing and services sectors, fell to 51.2 in June from a final reading of 53.6 in may.
A value 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, according to a third report from the Kansas City Fed.
Some manufacturers said they “expect a sharp drop in sales in the last half of the year”, also noting that it “appears that our customers have over-ordered and over-ordered
Last week’s claims data covered the period the government surveyed establishments for the non-farm payrolls component of the June jobs report. Applications increased moderately between the May and June survey periods.
The economy added 390,000 jobs in May. The claims report also showed the number of people receiving benefits after a first week of help rose by 5,000 to 1.315 million in the week ending June 11.
Next week’s data on so-called continuing claims, an indicator of hiring, will further shed light on the June 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 benchmark weeks, suggesting job growth continued to moderate,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania. “That’s what the Fed wants, because they want the economy to cool down.”
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Reporting by Lucia Mutikani; Editing by Nick Zieminski, Paul Simao and David Gregorio
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