WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits fell last week, in line with a labor market that remains tight amid strong demand for workers despite rising interest rates and tighter financial conditions.
Initial claims for state unemployment benefits fell from 8,000 to a seasonally adjusted 210,000 for the week ended May 21, the Labor Department said Thursday. The decline partially reversed some of the previous week’s surge, which had pushed claims to their highest level since January.
Economists polled by Reuters had forecast 215,000 applications for the past week. Some have blamed the recent increase in applications on less generous seasonal factors in May, the model used by the government to eliminate seasonal fluctuations in data, compared to the previous two months.
Others, however, believed some retailers were laying off workers. Several retailers, including Walmart Inc, cut their full-year profit forecasts last week, warning that inflation was cutting profits.
The Federal Reserve has raised its key rate by 75 basis points since March. The US central bank is expected to raise the key rate by half a percentage point at each of its next meetings in June and July. This led to a sharp sell-off in the stock market and a surge in Treasury and dollar yields.
But with a record 11.5 million job openings at the end of March, layoffs are expected to be minimal and people who lose a job can easily find another. Claims are down from a record high of 6.137 million in early April 2020.
Minutes from the May 3-4 Fed meeting released Wednesday showed officials said “demand for labor continues to outstrip available supply in many sectors of the economy and that their business contacts continued to report difficulties in hiring and retaining workers”. Many expected the labor market to remain tight and wage pressures to remain elevated for some time.
Higher wages, even if they lag inflation, help consumers continue to spend and support the economy.
In a separate report released Thursday, the Commerce Department confirmed that the economy contracted in the first quarter under the weight of a record trade deficit and a slightly slower pace of inventory accumulation compared to the fourth. trimester.
Gross domestic product fell at an annualized rate of 1.5 last quarter, the government said in its second estimate of GDP. This was revised down from the 1.4% pace of decline reported in April. The economy grew at a healthy pace of 6.9% in the fourth quarter.
(Reporting by Lucia Mutikani; Editing by Nick Zieminski)