According to a report from Reuters, the number of Americans filing claims for unemployment benefits fell last week, pointing to labor market resilience and giving the Federal Reserve room to focus on surging inflation from the war with Iran.
There are no signs yet that employers are responding to rising costs by reducing headcount. The nearly three-month long U.S.-Israeli conflict with Iran has disrupted shipping in the Strait of Hormuz, boosting energy prices, as well as straining global supply chains and causing shortages of a wide range of goods, including fertilizers, aluminum and consumer products.
“We still can’t rule out some spillover effects from the war and the spike in oil prices on to the labor market, which we have always expected would come with a lag,” said Matthew Martin, a senior U.S. economist at Oxford Economics. “But for now, we think the labor market is showing enough stability to allow the Fed to feel comfortable keeping policy steady.”
Initial claims for state unemployment benefits slipped 3,000 to a seasonally adjusted 209,000 for the week ended May 16, the Labor Department said on Thursday. Economists polled by Reuters had forecast 210,000 claims for the latest week. Claims have remained low despite high-profile layoffs in the technology sector, linked to the adoption of artificial intelligence.
Financial markets expect the U.S. central bank to keep its benchmark overnight interest rate in the 3.50%-3.75% range into next year. Minutes of the Fed’s April 28-29 meeting published on Wednesday showed concerns about inflation because of the conflict intensified last month, with a growing number of policymakers saying the Fed should lay the groundwork for a possible rate hike.
Policymakers “generally expected labor market conditions to remain stable in the near term,” the minutes showed, though most judged “that risks to the employment side” of the Fed’s “dual mandate were tilted to the downside.”
Last week’s claims data covered the period during which the government surveyed businesses for the nonfarm payrolls component of May’s employment report. Claims decreased between the April and May survey weeks. Payrolls increased by 115,000 jobs in April after rising 185,000 in March.
The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, increased 6,000 to a seasonally adjusted 1.782 million during the week ended May 9, the claims report showed.
U.S. stocks on Wall Street opened lower as oil prices rebounded after Reuters reported that Iran’s Supreme Leader had issued a directive that the country’s near-weapons-grade uranium should not be sent abroad. The dollar advanced versus a basket of currencies. U.S. Treasury yields were higher.
