US Jobless Claims Up Slightly After Previous Week's Cut, Complicating Fed's Task

The number of Americans filing new claims for unemployment benefits rose just moderately last week, the Labor Department reported Thursday as it slashed a large number of filings from the previous week in a move that suggested a relatively strong jobs market that could complicate the Federal Reserve's plan to pause rate hikes

WASHINGTON (UrduPoint News / Sputnik - 25th May, 2023) The number of Americans filing new claims for unemployment benefits rose just moderately last week, the Labor Department reported Thursday as it slashed a large number of filings from the previous week in a move that suggested a relatively strong jobs market that could complicate the Federal Reserve's plan to pause rate hikes.

The Fed has identified robust US job and wages growth as key drivers of inflation, saying both have to cool measurably in order for it to stop a year long of rate hikes.

Initial claims for unemployment benefits increased by 4,000 to 229,000 for the week ended May 20, said the Labor Department, which also revised down the prior week's filings by 17,000 applications.

"Initial jobless claims (came in at) 229K versus 245K estimate," economist Greg Michalowski said in a post on the ForexLive forum as he joined other analysts in noting that the data undershot the Fed's target for softer trends in labor.

The labor market has been the juggernaut of US economic recovery from the COVID-19 breakout, with hundreds of thousands of jobs being added without fail since June 2020 to make up for the initial loss of 20 million jobs to the pandemic.

Average monthly wages have also grown without a stop since May 2021.

Inflation, as measured by the Consumer Price Index, or CPI, hit 40-year highs in June 2022, expanding at an annual rate of 9.1%. Since then, it has slowed, growing at just 4.9% per annum in April, for its slowest expansion in two years. The Fed's favorite price indicator, the Personal Consumption Expenditures, or PCE, Index, meanwhile, grew by just 4.2% in March.

The Fed has raised rates by 10 times since the end of the coronavirus pandemic in March 2022, adding a total of 500 basis points, or 5%, that has brought rates to a peak of 525 basis points, or 5.25%.

The central bank's next rate decision is on June 14.

Federal Reserve Governor Chris Waller suggested on Wednesday the central bank may skip a rate increase in June but still lean towards a July hike depending on inflation data. St. Louis Fed President James Bullard, one of the more aggressive advocates for tighter monetary policy, has suggested at least two more rate hikes, totaling 50 basis points, that would bring rates to a peak of 5.75%.