US Labour Market Fairly Tight, Broader Economy Losing Steam

• The number of Americans filing new claims for jobless benefits fell last week, unwinding nearly half of the jump at the start of the month, indicating that labor market conditions remain fairly tight even as job growth is cooling.
• There are signs the economy slowed further early in the second quarter as the delayed effects of the Federal Reserve's hefty interest rate hikes start to have a bigger impact. Single-family homebuilding dropped again in April and permits for future construction hit an eight-month low. Output at factories unexpectedly fell, other reports showed on Thursday. April's economic data, including nonfarm payrolls and retail sales, have so far come below economists' expectations.
• "The economy is losing momentum in the face of restrictive monetary policy," said Sal Guatieri, a senior economist at BMO Capital Markets. "But the jury remains out on how quickly inflation will subside to provide some rate relief."
• Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 222,000 for the week ended May 11, the Labor Department said. Economists polled by Reuters had forecast 220,000 claims in the latest week. Claims raced to an eight-month high in the prior week.
• Unadjusted claims decreased by 13,325 to 196,725. Claims in New York tumbled 9,442, almost reversing a prior surge which the state attributed to layoffs in transportation and warehousing, accommodation and food services as well as educational services industries. There were significant drops in filings in Illinois and Indiana, more than offsetting a notable rise in Florida.
• The labour market is steadily rebalancing in the wake of 525 basis points worth of rate hikes from the U.S. central bank since March 2022 to cool demand in the overall economy. That, together with the resumption of inflation's downward trend, has raised the odds of a rate cut in September. Earlier this month, the Fed left its benchmark overnight interest rate unchanged in the current 5.25%-5.50% range, which it had been since July.

(Source: Reuters)