The number of Americans filing new claims for unemployment benefits remained last week unchanged at a low level. This indicates that the labor market continues to show strength, which is driving the overall economy.
The resilience of the labor market, along with ongoing inflation, has led financial markets and some economists to anticipate that the Federal Reserve (Fed) may postpone interest rate cuts until September. However, a few economists doubt that the U.S. central bank will reduce borrowing costs this year.
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According to Rubeela Farooqi, chief U.S. economist at High Frequency Economics, the layoffs continue to be at a low level. It is expected that the current trend will continue, with any changes in the labor market primarily stemming from a decrease in hiring rather than a sudden rise in terminations.
According to the Labor Department’s report on Thursday, initial claims for state unemployment benefits remained steady at 212,000 for the week ending April 13, after seasonal adjustments. Economists surveyed by Reuters had predicted 215,000 claims for the same week. Throughout this year, claims have fluctuated within the range of 194,000 to 225,000.
Unadjusted claims decreased by 6,756 to 208,509 last week. However, there was an increase of 3,063 claims in California. Significant increases in claims were also observed in Connecticut, Georgia, and Oregon. These increases were offset by a decline of 4,551 claims in New Jersey. In the previous week, New Jersey had experienced a surge in claims, attributed to layoffs in the accommodation and food services, transportation and warehousing, and public administration sectors. Furthermore, notable decreases in claims were observed in Minnesota, Ohio, Pennsylvania, and Wisconsin.
Powell’s caution on interest rate cut timing
On Tuesday, Fed Chair Jerome Powell refrained from providing specific guidance on when interest rates might be cut, instead uderscoring the need for continued restrictive monetary policy. Initially, financial markets anticipated a rate cut in March, but the timing has been pushed back to June and now to September, as labor market and inflation data have consistently outperformed expectations in the first three months of the year.
Since July, the Fed has maintained its policy rate within the range of 5.25 percent to 5.50 percent. Since March 2022, the benchmark overnight interest rate has been raised by 525 basis points.
The claims data covered the period during which the government conducted surveys for the nonfarm payrolls component of April’s employment report. Claims remained unchanged between the March and April survey weeks. In March, the economy added 303,000 jobs.
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