US Weekly Jobless Claims Hit 1-1/2-Year High; Inflation Subsiding

• The number of Americans filing new unemployment claims jumped to a 1.5-year high last week, pointing to cracks in the labour market as demand slows, potentially giving the Federal Reserve room to halt further interest rate increases next month.
• With demand cooling, inflation pressures are subsiding. Producer prices rebounded modestly in April, leading to the smallest annual increase in wholesale inflation in more than two years, according to data from the Labour Department.
• Economists believe these reports align with the expectation of a recession by the end of the year. "The Fed looks closer to winning the war on inflation today, but it risks losing the war on keeping the economy afloat and away from the shoals of recession," said Christopher Rupkey, Chief Economist at FWDBONDS in New York. Initial claims for state unemployment benefits increased by 22,000 to a seasonally adjusted 264,000 for the week ended May 6, the highest reading since October 2021. Economists polled by Reuters had forecast 245,000 claims for the latest week.
• Economists say claims in a 270,000-300,000 range would signal a deterioration in the labour market. Last week's surge could mark the start of an upward trend as the cumulative and lagged effects of the Fed's rate hikes broaden out in the economy. Layoffs, which were initially concentrated in the technology and housing sectors, appear to be spreading to other industries as companies gear for weak demand.

(Source: Reuters)