US Weekly Jobless Claims Fall; Producer prices are accelerating
© Reuters. FILE PHOTO: People line up outside a newly opened career center for personal appointments in Louisville, United States, on April 15, 2021. REUTERS / Amira Karaoud / File Photo
By Lucia Mutikani
WASHINGTON (Reuters) – The number of Americans filing new unemployment benefits fell more than expected last week as companies held on to their workers amid growing labor shortages that helped curb job growth in April.
The problem for workers comes from the booming demand in the economy, leading to widespread shortages of supplies in factories and rising inflation. Producer prices rose faster than expected in April, leading to the largest annual gain since 2010, other data showed on Thursday.
Initial claims to state unemployment benefits fell by 34,000 in the week ending May 8 to a seasonally adjusted 473,000, the Department of Labor said. This was the lowest since mid-March 2020, when mandatory shutdowns of non-essential businesses were enforced to slow the first wave of COVID-19 infections.
Economists polled by Reuters had forecast 490,000 applications for the past week. The decline in claims was led by Michigan, New York, and Florida.
Although the number of vacancies is 8.1 million and almost 10 million people are officially unemployed, companies are looking for workers. Layoffs are at an all-time low.
Generous unemployment benefits, fears of getting COVID-19, parents staying home to care for children and resource shortages, and pandemic retirement and career changes have all been blamed for the separation. The economy created 266,000 jobs in April after adding 770,000 in March, the government reported last week.
“With demand for workers high and layoffs relatively low, we should see strong attitudes in the months ahead as barriers to employment such as childcare subsides,” said Robert Frick, business economist at Navy Federal Credit Union in Vienna, Virginia.
“For many, especially low-wage workers, returning to a job where things like childcare, transportation, wages and benefits have to fit together is a mystery.”
Some economists believe the expanded unemployment benefits programs, including a $ 300 weekly government grant, might encourage some people to apply for assistance, with claims well in the 200,000-250,000 range than having one healthy labor market is considered compatible.
The number of unemployment claims has fallen from a record 6.149 million in early April 2020. Several states in the South and Midwest, including Tennessee and Missouri, whose unemployment rate is below the national average of 6.1%, recently announced that they would end state-funded pandemic unemployment benefits next month.
US stocks opened higher in the loss data. The dollar remained stable against a basket of currencies. US Treasury bond prices were higher.
The number of people receiving benefits after a first week of assistance fell by 45,000 in the week ended May 1 to 3.655 million. Some people find work while others exhaust their entitlement, which in most states is limited to 26 weeks. In the week ending April 24, around 5.3 million people received extended benefits.
Another 433,209 were on a government program for those who have exhausted their first six months of assistance. At the end of April, at least 16.9 million people were collecting unemployment checks through all programs.
The government provided nearly $ 6 trillion in pandemic relief last year. More than a third of the population was fully vaccinated, prompting many states to lift most business capacity restrictions.
The massive fiscal stimulus and improvements in public health have sparked a boom in demand that counteracts supply constraints and accelerates inflation.
In another report on Thursday, the Labor Department said the producer price index for final demand rose 0.6% in April, after rising 1.0% in March. A 0.6% increase in service costs accounted for about two-thirds of the increase in the PPI.
Services rose 0.7% in March. Commodity prices rose 0.6% last month after rising 1.7% in March.
In the 12 months to April, the PPI was up 6.2%. This was the largest year-over-year increase since the series was revised in November 2010 and a 4.2% increase in March.
The year-over-year PPI was raised as last spring’s weak readings are dropped from the calculation.
“Inflationary pressures are rising due to the reopening of the economy, problems in the supply chain and a global semiconductor shortage,” said Ryan Sweet, senior economist at Moody’s (NYSE 🙂 Analytics in West Chester, Pennsylvania.
The government reported Wednesday that April consumer prices rose the most in nearly 12 years, driven by supply chain bottlenecks and strong demand for tourism-related services as the economy re-opened.
Signs that inflation is warming lead investors to fear that the Federal Reserve may raise interest rates earlier than expected. Fed vice chairman Richard Clarida said Wednesday it would take “some time” for the economy to heal sufficiently that the US Federal Reserve might consider scaling back its support.
The Fed cut its key interest rate to near zero overnight last year and is pumping money into the economy through monthly bond purchases. It has signaled that it could tolerate higher inflation for some time to make up for years when inflation was below its 2% target, a flexible average.
The Fed’s preferred measure of inflation is the price index for personal consumption expenditure at 1.8%.