2023-05-11 14:04:35
The latest economic data from the USA are encouraging the financial markets to expect an interest rate pause by the central bank. The overheated labor market is showing signs of cooling, as the number of initial applications for unemployment benefits is increasing noticeably. A total of 264,000 citizens applied for state support last week, the Department of Labor in Washington announced on Thursday.
That is the highest level since the end of 2021. Economists had only expected 245,000, after 242,000 in the previous week. “The impact of the 2022 and 2023 US rate hike cycle may finally have an impact on what has surprisingly been a tight labor market and also bolster the Fed’s plans to suspend further rate hikes,” Validus Risk Management’s Ryan Brandham said.
The most recent US initial claims are no longer far below the critical 270,000 mark. This is considered a tipping point that signals a deterioration in the labor market. Recently, the job creation on the job market had shown itself to be robust: in April, 253,000 new jobs outside of agriculture were added. However, job growth in March was not as strong as originally reported – the figure was revised down by the ministry to 165,000 from 236,000.
In addition to inflation, the development on the labor market also determines how the US Federal Reserve acts in terms of monetary policy. It has raised interest rates from near zero to a range of 5.00 to 5.25 percent since early 2022. It may now be heading for a pause in interest rates, especially as inflationary pressure has surprisingly eased somewhat recently.
Goods and services rose 4.9 percent in April after 5.0 percent in March. Many economists had expected an unchanged value. It is possible that the pressure in the inflation pipeline will continue to ease: Producers of food, energy and other goods did not raise their prices as much in April.
Producer prices only increased by an average of 2.3 percent compared to the same month last year, as the Ministry of Labor announced. Economists had expected an increase of 2.4 percent after the inflation rate was 2.7 percent in March. The prices apply from the factory gate – i.e. even before the products are further processed or traded. They are therefore regarded as an early signal for the development of consumer prices.
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