The U.S. labor market remains fairly tight, which should continue to support the economy in the second quarter. The number of U.S. workers filing new claims for unemployment benefits remained largely unchanged at 208,000 last week while data revealed a marginal increase of 0.3 percent in worker productivity.
Despite concerns over productivity growth and inflationary pressures, economists maintain an optimistic outlook for the U.S. labor market, citing underlying trends and seasonal factors.
Unemployment claims remain steady
Initial claims for state unemployment benefits held firm at a seasonally adjusted 208,000 for the week ending on April 27, in line with economists’ expectations. This steadiness underscores the resilience of the U.S. labor market despite fluctuations in other economic indicators.
Productivity raises concerns
Economists largely dismissed concerns over the nearly stalled growth in worker productivity during the first quarter, attributing it to a seasonal hold that tends to bias gross domestic product (GDP) and productivity lower during this period.
A report from the Department of Labor‘s Bureau of Labor Statistics revealed that nonfarm productivity increased 0.3 percent during Q1 after rising 3.5 percent in Q4 of 2023. On an annual basis, productivity increased at a 2.9 percent rate.
While nonfarm productivity increased, unit labor costs experienced a notable 4.7 percent jump, raising concerns about inflation pressures and profit margins. On an annual basis, labor costs increased at a 1.8 percent rate, which is consistent with the Federal Reserve’s 2 percent inflation target.
Despite the quarterly increase, economists argue that the underlying trend in productivity growth remains healthy, supporting the Fed’s view of a balanced U.S. labor market. Therefore, they are closely watching productivity to measure the rate of increase in labor costs that does not impact inflation.
In addition, data from Challenger, Gray & Christmas revealed a 28 percent monthly decline in layoffs, which bodes well for the U.S. labor market.
Read: Hong Kong’s economy grows 2.7 percent in Q1 2024
Trade deficit narrows
In a separate report on Thursday, the Department of Commerce revealed that the U.S. trade deficit had narrowed 0.1 percent to $69.4 billion in March. However, a decline in exports impacted overall improvement. The department also revealed that factory orders saw a 1.6 percent increase in March.
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