WASHINGTON (Sputnik) – The number of Americans on jobless benefits has hit 1-½ year highs, according to weekly data from the Labor Department on Thursday that raised the chance for the Federal Reserve to withhold interest rate hikes from June as the central bank advances in its fight against inflation.
Initial claims for unemployment insurance rose by 22,000 during the week to May 6 to reach 264,000, the highest since October 2021, Labor Department data showed. Economists polled by US media had forecast total claims for the period at just around 245,000.
The weaker labor picture coincided with separate data from the department that showed producer prices — or what wholesalers of merchandise charge retailers — posting a smaller-than-expected growth in April.
US Treasury Secretary Janet Yellen speaks during a press conference at the G7 meeting of Finance Ministers and Central Bank Governors at Toki Messe in Niigata on May 11, 2023 – Sputnik International, 1920, 11.05.2023
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The so-called Producer Price Index, or PPI, posted a year-on-year growth of 2.3% in April, versus 2.7% gain in March. This was the lowest annual growth in the PPI since January 2021.
“The data move [in jobless claims] to the upside is starting to support weaker employment,” economist Greg Michalowski said in a posting on the ForexLive forum. He said the unemployment data along with weaker PPI support a Fed that is likely to keep rates unchanged.”
The Fed has identified robust job and wages growth as two of the key drivers of inflation.
The Fed has a mandate of ensuring “maximum employment” through a jobless rate of 4% or below, and keeping inflation “manageable.” The last was a task easily achieved before the COVID-19 breakout, when prices expanded less than 2% a year. The pandemic and the trillions of dollars of relief spending by the government, however, triggered runaway inflation since mid-2021.
The labor market has been the juggernaut of US economic recovery from the COVID-19 crisis, with hundreds of thousands of jobs being added without fail since June 2020 to make up for the initial loss of 20 million jobs to the pandemic. Average monthly wages have also grown without a stop since May 2021.
The central bank has raised rates by 10 times since the end of the coronavirus pandemic in March 2022, adding a total of 5% to the previous 0.25%.
After its last rate hike, the Fed said it will “closely monitor” data in the coming months and assess their effectiveness in helping the United States return to its inflation target of 2%.
That has given hope to the central bank’s watchers that the Fed could call for a pause at its next decision on rates on June 14.
