The US labor market remains tight. Business activity is slowing down

WASHINGTON: The number of Americans applying for new unemployment benefits fell last week as labor market conditions remained tight, despite a slowdown in the wake of high inflation and rising interest rates.

Despite the second consecutive weekly drop reported by the Ministry of Labor on Thursday, claims fluctuated close to the five-month high. Jobs cut in areas such as technology and housing amid worries about a recession as the US Federal Reserve tightens monetary policy to ease price pressures.

“The best days of the job market are behind this,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

Preliminary applications for state unemployment benefits fell by 2,000 to 229,000 seasonally adjusted for the week ended June 18. Economists surveyed by Reuters forecast 227,000 applications for the most recent week. Applications have been hit since they fell to a 53-year low of 166,000 in March.

While agreeing that there is a loss of momentum in the labor market, some economists also blame the stagnation of progress on claims on issues with models used to eliminate seasonal fluctuations from the data.

“The recent upward trend in seasonally adjusted data was mainly due to non-adjusted archiving not declining as much as seasonal factors expected. “Seasonal pre-adjustment applications have remained very low in recent weeks,” said Daniel Silver, an economist at JPMorgan in New York.

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Unadjusted receivables fell 3,255 to 202,844 last week. Illinois and Florida reported large reductions in claims, which helped offset the significant increase in Michigan.

The overall labor market remains tight. There were 11.4 million job opportunities at the end of April, with almost two openings for each unemployed person. But with growing company reports freezing hires and withdrawing job offers, jobs are falling lower.

Shares on Wall Street are mostly lower. The dollar rose against a basket of coins. US bond prices are rising.

SLOW DEVELOPMENT

Despite the lack of progress, the claims are at the average level observed in 2019. Economists say that they must constantly rise above the level of 250,000 to cause an alarm.

“There is nothing clear here that shows a weakening labor market,” said Isfar Munir, an economist at Citigroup in New York. “While anecdotal evidence suggests that more companies are laying off employees, especially technology companies, it still looks like hard data, and even if it does, it is unlikely to be big enough to change the current narrative.”

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The US Federal Reserve raised its policy rate by three-quarters of a percentage point last week, the largest increase since 1994. The Fed raised its overnight benchmark interest rate by 150 basis points since March.

Fed Chairman Jerome Powell told labor lawmakers it was “somewhat unsustainably hot.”

Recent data on retail, housing and manufacturing sales suggest that the economy is in recession, as it appeared to be recovering from the recession in the first quarter, which is largely due to the record trade deficit.

This was strengthened by a survey by S&P Global on Thursday, which shows that the US PMI Composite Output, which tracks the manufacturing and services sectors, fell to 51.2 in June from a final level of 53.6 in May.

Indications above 50 show growth in the private sector. Its lightning composite order index fell to 47.4, the first contraction since July 2020, from 54.9 in May.

Manufacturing in the area covering the western third of Missouri, Kansas, Colorado, Nebraska, Oklahoma, Wyoming and the northern half of New Mexico slowed this month, according to a third Fed report by Kansas City.

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Some manufacturers said they “expect a big drop in sales in the last six months”, also noting that it seems that our customers have exceeded orders and have surpluses

supply in the near future. “

Last week’s data figures covered a period during which the government inspected the non-agricultural payroll facility in its June employment report. Claims increased moderately between the May and June review periods.

The economy added 390,000 jobs in May. The compensation report also showed that the number of people receiving benefits after the initial week of aid increased by 5,000 to 1.315 million in the week ended June 11.

Next week’s data on so-called recruiting claims, which represent a recruitment representative, will explain more about the June employment report. The jobs are 822,000 below pre-pandemic levels, a gap that economists expect to close in the coming months.

“New applications rose between the payroll weeks of May and June, indicating that job growth continues to slow,” said Ryan Sweet, chief economist at Moody’s Analytics in West Chester, Pennsylvania. “This is what the Fed wants, because it wants the economy to be calm.” – Reuters

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