New weekly unemployment insurance claims — an indication of layoffs — have risen above analysts’ expectations to a three-month high, prompting some economists to question whether the tight labor market is headed for a softer patch.
Initial unemployment insurance claims rose 1,000 to 203,000 for the week ending May 7, the Labor Department said in a report (pdf). Economists expected a drop in unemployment claims to 195,000.
Unemployment claims hit a low of 166,000 in the week of March 19, and are up about 22 percent with this week’s surge.
Some analysts have suggested the prospect of a slow but steady deterioration in the labor market as rising inflation has forced the Fed into a tightening cycle as economic growth weakens.
“It’s a slow climb as we predicted @Quillintel. But it’s an inflection nonetheless,” economist Danielle DiMartino Booth said in a tweet commenting on Thursday’s number of unemployment claims.
Booth warned of signs that the US economy could slip into recession, pointing to a weakening of recent US manufacturing data, including inventories growing more slowly.
“Stockpiles built up in Fed regional manufacturing surveys have been the canary,” she wrote in a statement. recent tweet.
“In all respects, the discussion should move from an industrial recession to a broad and complete economic contraction,” she added.
The Institute for Supply Management (ISM) monthly manufacturing survey found that the inventory index fell 3.9 percentage points in April compared to March, indicating a slowdown in inventory growth. New orders, production and employment also grew at a slower pace.
The overall ISM manufacturing index stood at 55.4 percent in April, down 1.7 percentage points from the previous month. Readings above 50 indicate expansion.
“Production performed well for the 23rd straight month, with demand registering slower month-to-month growth (probably due to longer lead times and decades-long material price increases) and a decline in consumption (due to labor constraints),” Timothy Fiore , chairman of the ISM Manufacturing Business Survey Committee, in a statement.
“Overseas partners are experiencing the impact of COVID-19, which is causing headwinds for the US manufacturing community in the near term,” he added.
Still a source of strength
Some analysts are noting that Thursday’s jobless claims are close to an all-time low and there are signs that the job market remains strong.
“Overall, the job market is still a source of strength in an economy rife with concerns about inflation, higher interest rates and more,” Bankrate senior industry analyst Ted Rossman told The Epoch Times in an emailed statement. .
“Historically, this figure (203,000) is still quite low. It’s probably unrealistic to expect it to drop much below 200,000,” Rossman added.
Prior to the pandemic, first claims for unemployment benefits averaged around 210,000 per week.
Other data in Thursday’s unemployment report suggests that the labor market remains tight. Sustained unemployment claims, which are a week behind the original number of applications filed and reflect the total number of people receiving benefits through traditional state programs, fell by 44,000 to 1.343 million, the lowest since 1970.
“Persistent claims fell to their lowest level in 52 years, indicating that spells of unemployment today are generally short-lived,” Rossman said.
Recent labor market data showed that the number of job openings in the United States rose to an all-time high of 11.5 million, while a record number of Americans left their jobs.
The data also showed that there were nearly twice as many job vacancies as there were unemployed, with employers still having trouble hiring workers, raising wages to attract and retain staff.
The beginning of the end?
Economist Fabian Wintersberger wondered if Thursday’s jobless filings signal “the beginning of the end of the ‘tight labor market'”. add a tweet that part of the story behind the labor shortage is due to low employment rates rather than economic fundamentals.
It’s a theme expounded by economist Daniel Lacalle, who told The Epoch Times in an emailed statement that “the U.S. job market tightness is more political propaganda than reality.”
“In March, the employment rate was 62.4 percent and the employment to population ratio was 60.1 percent. Both have been standing still for almost a year and both remain below the February 2020 levels (63.4 percent and 61.2 percent),” he said.
“So the job market is far from recovering, which explains why median wage growth is so bad,” Lacalle added.
In April, the U.S. employment rate fell to 62.2 percent, while nominal month-on-month wage growth slowed to 0.3 percent, from 0.4 percent in March.
Nominal wages, unadjusted for inflation, rose 5.5 percent in the year to April, but the faster rate of consumer price growth at 8.3 percent means inflation-adjusted real wages rose 2.8 percent. have fallen.
Allianz chief economic adviser Mohamed El-Erian warned in a recent interview that the inflation problem in the United States would invariably turn into a cost of living crisis as price pressures spread to more categories, driving wage increases for many American households and dents question.