US Labour Market Remains Tight; Profits Decline In The First Quarter

• The number of Americans filing new claims for unemployment benefits increased moderately last week and data for the two weeks prior was revised sharply lower. This was likely due to the fraudulent applications from Massachusetts being stripped out, indicating persistent labour market strength.
• The report from the Labour Department on Thursday, also showed fewer people collecting unemployment checks in mid-May, suggesting that the economy was enjoying another month of strong employment gains and a lower jobless rate. "The worrisome trend of more layoffs just got completely revised away where the labour market isn't loosening up as much as Fed officials and markets had thought," said Christopher Rupkey, chief economist at FWDBONDS in New York.
• Initial claims for state unemployment benefits increased by 4,000 to a seasonally adjusted 229,000 for the week ended May 20 with Economists polled by Reuters having forecasted 245,000 overall claims for the latest week. The low claims align with recent data on retail sales, factory production and business activity that have suggested the economy regained speed at the start of the second quarter.
• Given that the labour market outcomes factor greatly into the Fed’s interest rate decisions, lower-than-expected unemployment claims and stronger business and factory production readings in Q2 could mean more rate hikes are on the horizon. This could increase the possibility of a recession, intensify the banking system issue and contribute to tighter lending conditions in the USA.

(Source: Reuters)