In the United States, weekly unemployment claims increase slightly; Unit labor costs stoke inflation fears

Weekly unemployment claims increase by 3,000 to 221,000. Continuing claims increase by 39,000 to 1.892 million. Productivity increases at a rate of 2.2% in the third quarter. Unit labor costs increase at a steady pace of 1.9%

WASHINGTON, Nov 7 (Reuters) – The number of Americans filing new claims for unemployment benefits rose slightly last week, suggesting there is no major change in the job market and reinforcing the view that hurricanes and strikes virtually halted job growth in October.

Although the labor market is easing, wage pressures are not showing a significant slowdown, casting a shadow over the outlook for inflation and interest rates. Unit labor costs rose at a steady pace in the third quarter, other Labor Department data showed Thursday.

Economists said the sharp rise in labor costs, which was accompanied by a sharp upward revision of second-quarter data, was not consistent with the return of inflation and continued inflation. Federal Reserve's 2% target. The US central bank on Thursday cut interest rates by 25 basis points as expected, lowering its benchmark rate to the range of 4.50% to 4.75%.

“Growth in unit labor costs is the primary determinant of prices for basic, labor-intensive services,” said Paul Ashworth, chief North America economist at Capital Economics . “Unless growth in unit labor costs slows again, it will be much harder for Fed officials to claim that inflation can be kept at 2 percent.”

Initial claims for state unemployment benefits increased by 3,000 to 221,000 seasonally adjusted for the week ended Nov. 2, the Labor Department said. Economists polled by Reuters had forecast 221,000 claims for last week.

Unadjusted claims rose 10,827 to 212,274 last week, boosted by a 4,278 increase in California filings. Claims increased by 3,563 in Michigan and 1,927 in Ohio, more than offsetting notable declines in Florida and Georgia.

Job growth slowed sharply last month, with nonfarm payrolls increasing by just 12,000 jobs, the lowest rate since December 2020. This matches an increase in unemployment claims in early October as Hurricane Helene disrupted economic activity in the southeastern region of the United States. Applications remained high until the middle of last month after Hurricane Milton hit Florida. A strike by Boeing (BA.N) factory workers, which forced the planemaker to implement rolling furloughs, also weighed on payrolls in October. The disruptions caused by the hurricanes have all but disappeared and strikers returned to work after reaching a new contract this week, paving the way for accelerated job growth in November.

“New information indicates that October's weak jobs numbers were likely an aberration caused by storms and strikes and that we should see a rebound in November,” said Abiel Reinhart, an economist at JPMorgan.

INFLATION BACK IN POINT OF VIEW

The number of people receiving benefits after an initial week of aid, an indicator of hiring, increased by 39,000 to 1.892 million on a seasonally adjusted basis in the week ending Oct. 26, according to the report.

“The Boeing strike settlement will lower the number of pending claims once next week's report is released,” said Carl Weinberg, chief economist at High Frequency Economics. “There is no call for radical monetary easing in today’s numbers, or in any labor market indicator for that matter.”

The Fed began its policy easing cycle with an unusually large rate cut of half a percentage point in September, the first reduction in borrowing costs since 2020. It raised rates by 525 basis points in 2022 and 2023 to curb high inflation. .

Stocks on Wall Street rose. The dollar slipped against a basket of currencies.

The yield on the 10-year U.S. Treasury note fell from a four-month high as investors continued to digest Donald Trump's victory in the U.S. presidential election, fueling fears that his economic policies does not fuel inflation.

Concerns about inflation have been amplified by a separate report from the Labor Department's Bureau of Labor Statistics showing that unit labor costs – the price of labor per unit of output – have increased at a solid annualized rate by 1.9% during the July-September quarter after an upward revision. Expansion rate of 2.4% in the second quarter.

Economists expected labor costs to rise at a rate of 1.0%, following a previously reported 0.4% pace of increase in the second quarter.

Productivity and labor costs

The revisions reflect annual updates to national accounts data released in September, which showed stronger-than-expected income and overall economic growth.

Labor costs increased at a rate of 3.4% year-over-year, compared to 3.2% in the second quarter.

However, they were revised downward by 0.6 percentage points, to 2.2% in 2023. They increased by 5.1% in 2022, compared to 5.7% previously announced. But they started again this year.

“Chairman (Jerome) Powell and others at the Fed have essentially said that the labor market no longer has an upward influence on inflation,” said Stephen Stanley, chief U.S. economist at Santander US Capital Markets. “This data suggests that this optimistic view may be a little premature.”

Nonfarm productivity, which measures hourly output per worker, increased at a rate of 2.2% last quarter after a downwardly revised growth rate of 2.1% in the April-June quarter. Productivity was previously estimated to have increased at a rate of 2.5% in the second quarter. It increased at a rate of 2.0% compared to a year ago.

Productivity grew at a rate of 1.9% between the first quarter of 2018 and the second quarter of 2024, a rate revised upwards from the previously estimated pace of 1.7%, alongside upgraded productivity data. GDP. It has been revised upwards in each of the last three years and helps support the economy.

“Companies continue to invest in technologies that will make their current workers more productive,” said Gus Faucher, chief economist at PNC Financial. “In the long term, artificial intelligence holds enormous potential to drive productivity growth.”

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Reporting by Lucia Mutikani; Editing by Paul Simao, Chizu Nomiyama and Andrea Ricci

Our Standards: The Thomson Reuters Trust Principles., opens a new tab

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