CEO Morning Brief

US Weekly Jobless Claims Rise, 1Q Labour Costs Revised Lower

Publish date: Fri, 07 Jun 2024, 10:52 PM
TheEdge CEO Morning Brief
“There’s a pretty good chance that the establishment survey has been really overstating the condition of the labour market,” Barry Knapp, founder of Ironsides Macroeconomics, said of the monthly payroll numbers. “The job market is weaker than the Fed thinks.”

(June 6): The number of Americans filing new claims for unemployment benefits increased last week and unit labour costs rose by less than previously thought in the first quarter, indicating the labour market is cooling but not enough to allay the Federal Reserve's hesitance to begin cutting interest rates.

Initial claims for state unemployment benefits rose 8,000 to a seasonally adjusted 229,000 for the week ended June 1, the Labor Department said on Thursday. Economists polled by Reuters had forecast 220,000 claims in the latest week.

The labour market has been steadily rebalancing back toward pre-pandemic levels after the Fed raised interest rates by roughly 525 basis points since March 2022 to slow demand in the overall economy.

The so-called continuing claims tracking those who collect benefits beyond the first week increased 2,000 to a seasonally adjusted 1.792 million during the week ending May 25.

"The level (of weekly jobless claims) remains in a range that suggests the labour market remains tight," said Thomas Simons, US economist at Jefferies. "Continuing claims are still very low by any historical standard, and we still see the data as supporting the notion that people who lose a job are able to find a new one with relative ease."

Data earlier this week showed US job openings in April fell more than expected and the number of available jobs per job-seeker reached its lowest level since June 2021.

Earlier on Thursday, US employers announced the fewest job cuts last month since December and layoff announcements so far in 2024 are running behind last year's pace, according to data from outplacement firm Challenger, Gray and Christmas.

Employers announced 63,816 cuts in May, a 1.5% decrease from the 64,789 cuts announced in April and down about 20% from the 80,089 cuts announced a year earlier. Year-to-date layoff announcements are 7.6% lower than in the first five months of 2023.

Productivity, labour costs revised lower

US worker productivity grew slightly less than previously estimated in the first quarter but exceeded market expectations, and unit labour costs rose by less than first thought, data from the Labor Department also showed on Thursday.

Non-farm productivity, which measures hourly output per worker, increased at a 0.2% annualised rate in the first quarter, revised down from an initial estimate of 0.3% one month ago. Economists polled by Reuters had estimated a revision down to 0.1%.

Unit labour costs rose at a 4.0% annualised rate, down from the first estimate of 4.7%. Economists had projected labour costs to be revised up to 4.9%.

Productivity accelerated and labour costs were subdued through much of 2023, ending at 3.5% and unchanged, respectively, in the fourth quarter. At the time, that had been seen as one of the arguments favouring Fed rate cuts in 2024 as it was hoped improved worker efficiency would dampen inflation.

The near stalling of productivity in the first quarter did not further that cause, though some economists had cautioned after the initial BLS estimate was published last month that the data had been influenced by a seasonal quirk and the trend of improving productivity might still hold up.

Elsewhere, the Commerce Department reported the US trade deficit widened in April as a jump in imports outpaced a slight increase in exports, which is likely to dampen economic growth in the second quarter.

The trade deficit increased 8.7% to US$74.6 billion (RM350.5 billion), the Commerce Department's Bureau of Economic Analysis said on Thursday, the largest since October 2022. Data for March was revised to show the trade gap narrowing slightly to US$68.6 billion instead of the previously reported US$69.4 billion.

Source: TheEdge - 7 Jun 2024

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