Weekly jobless claims in the United States lowered consumer prices expected to rise further
By Lucia Mutikani
WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits likely fell last week to its lowest level in nearly 15 months, as consumer prices rose again in May as the easing of the pandemic on the economy continues to stimulate demand.
The Labor Department is expected to report Thursday that initial state unemployment claims stood at 370,000 seasonally adjusted for the week ended June 5, up from 385,000 the week before, according to a Reuters survey of economists.
This would be the lowest since mid-March 2020, when the first wave of COVID-19 infections swept across the country, shutting down non-essential businesses, and marking the sixth consecutive weekly decline.
Layoffs are declining as employers scramble to find work as millions of unemployed Americans stay at home amid challenges with childcare, generous unemployment benefits and lingering fears of the virus even though vaccines are now widely available.
At least half of America’s adult population has been vaccinated against the virus, allowing for broader economic re-engagement. But pent-up demand triggered by the resumption of business is straining the supply chain and stoking inflationary pressures.
Economists expect another Labor Department report on Thursday to show the consumer price index rose 0.4% last month after jumping 0.8% in April, which was the largest increase since June 2009.
In the 12 months to May, the CPI is expected to accelerate 4.7%. This would be the largest year-over-year increase since September 2008 and follow a 4.2% increase in April. The anticipated jump will partly reflect the lower readings from last spring of the calculation. These so-called base effects should stabilize in June.
Inflation could also be boosted by employers raising wages as they compete for scarce workers, although employment is still 7.6 million jobs below its February 2020 peak. a record 9.3 million unfilled jobs.
Wages rose a solid 0.5% in May, with sizable gains in the leisure and hospitality sector.
The acceleration of inflation will have no impact on monetary policy. Federal Reserve Chairman Jerome Powell has repeatedly said that higher inflation will be transient. The US central bank cut its benchmark overnight interest rate to near zero last year and is pumping money into the economy through monthly bond purchases.
The Fed has indicated that it may tolerate higher inflation for a period of time to compensate for years in which inflation has remained below its target of 2%, a flexible average. Its preferred measure of inflation, the personal consumption expenditure (PCE) price index, excluding the volatile components of food and energy, rose 3.1% in April, the largest increase since July. 1992.
“We have yet to see the peak in inflation, but it is expected to occur in the current quarter, although existing pressures are expected to keep the year-over-year pace high for the remainder of 2021. “said Sam Bullard, senior economist at Wells Fargo. in Charlotte, North Carolina.
“We expect inflation to slow more noticeably in the second half of 2022, but with inflation expectations continuing to strengthen, core PCE inflation is expected to remain above 2, 0% throughout our forecast horizon. “
Although layoffs are declining, initial claims remain well above the 200,000 to 250,000 range, which is considered compatible with healthy labor market conditions. Claims fell from a record 6.149 million in early April 2020, however.
Further declines in claims are likely as Republican governors in at least 25 states, including Florida and Texas, cut federally funded unemployment programs for residents starting Saturday.
These states represent about 40% of the economy. Benefits that were terminated earlier include a weekly unemployment allowance of $ 300, which the companies say discourages the unemployed from looking for work.
(Reporting by Lucia Mutikani; Editing by Dan Burns and Andrea Ricci)