WASHINGTON, Jan 13 — The number of Americans filing new claims for unemployment benefits unexpectedly rose in the first week of January amid raging Covid-19 infections, but remained at a level consistent with rapidly tightening labour market conditions.
Other data today suggested the worst of high inflation was probably behind. Producer prices recorded their smallest gain in 13 months in December as the cost of goods declined. The drop in goods prices was the first since April 2020.
“These are still subdued readings on jobless claims and do not change our view that job creation continued at a solid pace into January despite the spread of Omicron,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
Initial claims for state unemployment benefits increased 23,000 to a seasonally adjusted 230,000 for the week ended January 8, the Labour Department said. Economists polled by Reuters had forecast 200,000 applications for the latest week.
A surge in coronavirus cases, driven by the Omicron variant, has disrupted activity from airlines to schools as workers call in sick. Unadjusted claims jumped 103,693 to 419,446 last week.
They were driven by a surge in New York, which has seen sky-rocketing coronavirus infections. There were also big increases in filings in California, Florida, Kentucky, Missouri, Tennessee, Texas, Utah and Indiana. But applications fell significantly in Connecticut, Massachusetts and Michigan.
Still, claims remain below their pre-pandemic level, a sign of strengthening labour market conditions. They have declined from a record high of 6.149 million in early April 2020. Employers are hanging on to their workers, with 10.6 million job openings at the end of November.
The Federal Reserve’s Beige Book report yesterday of anecdotal information on business activity, collected from contacts nationwide on or before January 3, showed many were allowing part-time work or adjusting qualifications “to attract more applicants and retain existing workforces.”
More workers are getting off unemployment benefits rolls, which could help to boost the labour pool.
The claims report showed the number of people receiving benefits after an initial week of aid dropped 194,000 to 1.559 million in the week ended January 1. This is the lowest level for these so-called continuing claims since June 1973.
The government reported last Friday that the unemployment rate fell to a 22-month low of 3.9 per cent in December, an indication that the labour market is at or close to maximum employment. The workforce is about 2.2 million people smaller than before the pandemic.
Shrinking labour market slack and surging inflation are leading economists to expect the Fed to increase interest rates in March. The US central bank has a 2 per cent inflation target.
In a separate report on Thursday, the Labour Department said the producer price index for final demand increased 0.2 per cent last month. That was the smallest gain in the PPI since November 2020 and followed a 1.0 per cent jump in November.
Wholesale services prices rose 0.5 per cent, accounting for the increase in the PPI. That followed a 0.9 per cent jump in November.
Goods prices fell 0.4 per cent after advancing 1.1 per cent in the prior month. They were held down by decreases in wholesale food and energy prices. Excluding food and energy, goods prices rose 0.5 per cent after increasing 0.8 per cent in November.
In the 12 months through December, the PPI increased 9.7 per cent after accelerating 9.8 per cent in November.
Economists polled by Reuters had forecast the PPI gaining 0.4 per cent on a monthly basis and surging 9.8 per cent year-on-year.
The government reported on Wednesday that consumer prices soared 7 per cent year-on-year in December, the largest gain since June 1982.
“Monthly price increases are slowing but still high, and the Fed won’t veer off its path to finish tapering in March and start hiking rates this year,” said Will Compernolle, a senior economist at FHN Financial in New York.
The government revised PPI figures from last August through November because of the late submission of data as well as to account for corrections by respondents.
Inflation is surging as Covid-19 and the recovery from the pandemic have caused bottlenecks in the supply chain. But there is cautious optimism that price pressures are close to peaking.
An Institute for Supply Management survey last week showed manufacturers reporting improved supplier deliveries in December.
Excluding the volatile food, energy and trade services components, producer prices rose 0.4 per cent in December. The so-called core PPI vaulted 0.8 per cent in November. In the 12 months through December, the core PPI rose 6.9 per cent, matching November’s increase. — Reuters
