WASHINGTON (Reuters) – The number of new Americans filing unemployment benefits last week fell to its biggest drop in 20 months, the latest sign of economic resilience, the Federal Reserve said. may resume rate hikes in July.
The unexpected drop in claims reported by the Labor Department on Thursday reversed a recent surge in initial unemployment claims over the past three weeks that hovered at levels last seen in October 2021. Some economists have concluded that layoffs are on the rise as a result of the rising numbers. It is on an upward trend as the economy begins to feel the heat from the Fed’s big rate hike.
The labor market remains strong, and rising wages have managed to reverse recession forecasts. Other data on Thursday showed economic growth was faster than previously expected in the first quarter, thanks to strong consumer spending. This month’s report also showed better-than-expected job gains in May, as well as higher retail sales and a surge in housing starts, and the momentum appears to be continuing in the second quarter.
“The economy is showing signs of real resilience right now,” said Gregory Dako, chief economist at EY-Parthenon in New York. “This is right for many to question whether the long-anticipated recession is really inevitable or whether a soft landing for the economy is possible.”
First-time claims for state unemployment benefits fell by 26,000 in the week ending June 24, to a seasonally adjusted 239,000. The decline was the largest since October 2021.
Economists polled by Reuters had expected 265,000 claims in the past week.
A recent policy change in Minnesota that allowed tens of thousands of hourly school workers to qualify for state unemployment benefits during the summer vacation was part of the increase in claims in the first three weeks of June. occupied the department. Fraud allegations in Ohio also played a role.
The number of unadjusted claims last week fell by 17,843 to 233,048. Claims fell by 10,108 in California and 9,187 in Texas. Pennsylvania reported a decrease of 3,263, while Minnesota reported a decrease of 2,387. These declines offset increases of 6,013 in Connecticut and 5,206 in New Jersey.
Claims can be volatile in July, as automakers often shut down factories to introduce new models. But these factory shutdowns don’t necessarily coincide with each other, and could undermine the models governments use to remove seasonality from their data.
The number of applications relative to the size of the labor market is well below the 280,000 level that some economists say represents a sharp slowdown in job growth. Employment growth averaged 314,000 per month this year.
“So far, there are no signs that labor demand will deteriorate significantly,” said Rubira Faroochi, chief U.S. economist at High Frequency Economics in White Plains, N.Y.
Financial markets are almost fully pricing in a 25 basis point rate hike at the Fed’s July 25-26 policy meeting, according to CME Group’s FedWatch tool.
Fed Chairman Jerome Powell said Thursday at an event hosted by the Bank of Spain in Madrid that he “expects the gradual pace” of interest rate decisions that were suspended in June.
US Treasury yields rose. Dollar rose against a basket of currencies. Wall Street stocks were rising.
1st Quarter GDP Revised Up
The number of people receiving benefits after the first week of aid, a measure of employment, fell by 19,000 to 1,742,000 in the week ending June 17, according to claims reports. , the lowest level since February. The historically low so-called continuing claims mean that some of the laid-off workers are experiencing short periods of unemployment.
Consumer perceptions of the labor market were upbeat in June, with more people seeing jobs as “abundant” than in May, according to a study released this week by The Conference Board.
Continued claims covered the period when the government surveyed households for the June unemployment rate. Continuing claims declined between May and he June investigation period. The unemployment rate in May was 3.7%.
Wage gains from a tight labor market spurred consumer spending in the first quarter, offsetting a drag from a sharp slowdown in firms’ inventory spending.
The Department of Commerce said Thursday in its third-quarter gross domestic product (GDP) estimates that GDP grew at an annualized rate of 2.0% in the previous quarter.
The upward revision from last month’s reported 1.3% pace reflected improved consumer spending and exports. Economic growth in the fourth quarter was 2.6%.
Economists had expected gross domestic product (GDP) growth to pick up slightly to a 1.4% pace in the first quarter.
Fifteen industries contributed to GDP growth last quarter, including health and social assistance, retail trade, agriculture, real estate, rentals and leasing, and lodging and food services.
However, seven industries, including finance/insurance, manufacturing, and wholesale, held back.
Corporate profits fell for the third quarter in a row, but the decline in the first quarter was not as big as initially expected. After-tax earnings, which exclude inventory valuations and capital expenditure adjustments, which correspond to earnings on the S&P 500, fell 1.2%, rather than the 2.1% pace previously expected.
As a result, economic output shrank by 1.8% in terms of income. Gross domestic income (GDI) in the first quarter was initially estimated to decline at a pace of 2.3%. GDP and GDI should be equal, but they are different because most of them are estimated using independent source data.
Average GDP and GDI, also known as Gross Domestic Product and considered better indicators of economic activity, edged up at a pace of 0.1%, rather than the 0.5% decline reported last quarter. Economists expected the GDI to be revised toward GDP when the government updates the data later this year.
“The economy will struggle as a result of the Fed’s actions … slowing growth will push inflation down without triggering a recession,” said Scott Hoyt, senior economist at Moody’s Analytics in Westchester, Pennsylvania. rice field.
Reported by Lucia Mutikani.Editing: Chizu Nomiyama, Andrea Ricci
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