US weekly jobless claims rise; producer inflation declines

WASHINGTON, April 13 (Reuters) – The number of Americans filing new jobless claims rose more than expected last week, further evidence that labor market conditions eased as higher borrowing costs dampen demand in the economy.

The slowing momentum in the economy was underscored by other Labor Department data on Thursday that showed producer prices fell unexpectedly in March, with underlying producer inflation easing. Still, the labor market and inflation are not cooling fast enough to stop the Federal Reserve from raising interest rates one more time next month.

“Fed officials couldn’t ask for better data today as the economy looks like it’s finally running out of gas after a year of rate hikes,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “Fed officials thought the economy might slow down after the banking crisis, and now the slowdown appears to be happening.”

Initial claims for state unemployment benefits rose by 11,000 to a seasonally adjusted 239,000 for the week ending April 8. Economists polled by Reuters had forecast 232,000 claims for the past week.

Unadjusted claims rose by 27,457 to 234,577 last week, with filings in California rising by 11,388. There were also significant gains in claims in New Jersey, Pennsylvania, Texas, New York and Connecticut. That offset a notable decline in Ohio.

Annual revisions to the data published by the government last week showed claims that were much higher so far this year than previously estimated, in line with a rush of high-profile layoffs in the technology industry as well as other sectors highly sensitive to interest rates.

Claims, however, remain below the 270,000 level, a breach that economists say would signal a deterioration in the labor market. Last Friday’s employment report showed a lower but still solid pace of job growth in March.

The number of vacancies fell below 10 million at the end of February for the first time in almost two years. Nevertheless, there were 1.7 vacancies for every unemployed person that month, which may make it easier for some laid-off workers to get a job.

The claims report showed that the number of people receiving benefits after a first week of assistance, a proxy for employment, fell 13,000 to 1.810 million in the week ended April 1.

There are currently no signs that a tightening of credit conditions following the failure of two regional banks last month has led to job losses.

Economists expect that small businesses such as restaurants, bars and nail salons will be hit by a credit crunch.

US stocks opened higher. The dollar fell against a basket of currencies. Prices for US Treasuries were mixed.

SERVICES PRICES SALKER

The financial markets are betting that the Fed will raise interest rates by a further 25 basis points at its policy meeting on 2-3. May, according to CME Group’s FedWatch tool. It will probably be the last interest rate increase in the US central bank’s fastest monetary policy tightening campaign since the late 1980s.

The Fed last month raised its overnight benchmark interest rate by a quarter of a percentage point, but indicated it was on the verge of halting further rate hikes in a nod to turmoil in financial markets. It has raised the key rate by 475 basis points since March last year, from near zero levels to today’s range of 4.75-5.00%.

In a separate report Thursday, the Labor Department said the producer price index for final demand fell 0.5% in March, the most since April 2020, after being unchanged in February.

A 1.0% decline in commodity prices accounted for two-thirds of the decline in PPI last month. Commodity prices fell 0.3 per cent in February. Petrol prices fell by 11.7 per cent last month, while food prices rose by 0.6 per cent.

There was also a decrease in the prices of diesel, natural gas for homes and electricity. Gasoline prices are set to rebound after Saudi Arabia and other OPEC+ oil producers announced further oil production cuts early this month.

Excluding the volatile food and energy components, core commodity prices rose 0.3% after a corresponding increase in February.

Prices of services fell 0.3%, the biggest decline since April 2020. There was a 0.9% decline in margins for final demand for trade services. The costs of transport and storage services fell by 1.3%.

In the 12 months to March, PPI rose 2.7%. It was the smallest year-on-year increase since January 2021 and followed a 4.9% gain in February.

The annual PPI rate is falling as last year’s large increases fall out of the calculation. Economists had forecast PPI unchanged on the month and a rise of 3.0% year-on-year.

The government reported on Wednesday that overall consumer prices barely rose in March. While underlying inflation remained high, rents rose at the slowest pace in almost a year.

Excluding components for food, energy and trade services, producer prices rose 0.1% in March. Core PPI rose 0.2% in February. In the 12 months to March, core PPI rose 3.6% after rising 4.5% in February.

“The link between PPI and CPI is not as clear as it once was, but sustained small increases – or, as in March, an outright decline – will eventually pass through to consumers if demand slows enough to prevent companies from picking up the slack . in the form of higher margins,” said Chris Low, chief economist at FHN Financial in New York.

“For a Fed that is already inclined to take a break, this report tips the scale a bit more in its favor, especially after yesterday’s CPI failed to reveal any new inflation concerns.”

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama

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