The labour market in U.S.A is tightening, with weekly unemployment claims at the lowest level

Last week, the number of Americans filing new jobless benefits claims fell to a 52-1/2-year low, while unemployment rolls continued to decline, indicating fast reducing labour market slack that will continue to support wage inflation. The Federal Reserve may raise interest rates by half a percentage point at its next policy meeting in May, based on the strength of the labour market reported by the Labor Department on Thursday. Fed Chair Jerome Powell said on Monday that the US central bank must hike rates “aggressively” and “expeditiously” to prevent rising inflation from becoming entrenched.

The Federal Reserve raised its policy interest rate by 25 basis points last week, the first rise in almost three years. “Businesses in the United States are not laying off people because they are aware of the significant hurdles they have in filling available positions,” said Ryan Sweet, a senior economist with Moody’s Analytics in West Chester, Pennsylvania. “The Fed will raise a red flag if initial claims remain below 200,000 for an extended length of time.” For the week ending March 19, initial applications for state unemployment benefits declined by 28,000 to a seasonally adjusted 187,000, the lowest level since September 1969. Reuters polled economists, who predicted 212,000 applications for the most recent week.

The decline in claims last week was broad, with significant drops in California, Michigan, Kentucky, and other states. COVID-19 limitations have been relaxed across the country, resulting in a significant reduction in coronavirus infections. They’ve dropped from a peak of 6.149 million in early April 2020, which was a new high. There are no evidence that Russia’s war against Ukraine has had an impact on the job market or corporate activity, despite the fact that it has brought U.S. gasoline prices to record highs and is projected to exacerbate the strain on global supply chains.

S&P Global’s flash U.S. Composite PMI Output Index, which covers the manufacturing and services sectors, surged to an eight-month high of 58.5 in March from 55.9 in February, propelled by robust demand for both products and services, according to a survey released on Thursday. Businesses were optimistic about the year ahead, while services firms were concerned about the consequences of the growing cost of living brought on by the Russia-Ukraine conflict. Following a steep plunge on Wednesday, Wall Street stocks have recovered. Against a basket of currencies, the dollar gained ground. The price of US Treasuries dropped.

Orders for non-defense capital goods excluding aircraft, a highly watched proxy for company spending intentions, dipped 0.3 percent in February, the first drop in a year, according to a third report from the Commerce Department. However, data for January was revised upward, showing that these so-called core capital goods orders increased by 1.3 percent instead of the previously reported 1.0 percent. Orders for equipment, basic metals, fabricated metals, as well as computers and electrical devices, all fell last month.
Last month, shipments of core capital items increased by 0.5 percent. Shipments increased 2.1 percent in January, instead of the previously projected 1.9 percent, according to updated data. In the gross domestic product calculation, core capital goods shipments are utilised to compute equipment spending. Economists anticipate robust company investment in equipment this quarter, based on the January revision.

“The February decrease might signal a change in firms’ capex intentions, but the February results could also just reflect noise in the monthly data,” said Daniel Silver, an economist at JPMorgan in New York. “We believe actual equipment expenditure will climb strongly in the first quarter, notwithstanding price hikes that will offset some of the nominal gains.”

Due to a severe labour shortage, layoffs are anticipated to remain low for some time. At the end of January, there were 11.3 million job opportunities, with an all-time high of 1.8 vacant positions per jobless individual. This imbalance of labour demand and supply is driving wage growth, which is giving some relief to consumers from the rising cost of fuel. As COVID-19 infections decline, more people may return to work this month, boosting payroll growth.
The number of persons getting benefits after an initial week of assistance fell by 67,000 to 1.350 million in the week ending March 12, the lowest since January 1970, according to the claims report.

The government polled families for the jobless rate in March during the period covered by the so-called continuing claims statistics.
Between the February and March survey periods, the number of people filing new claims dropped dramatically. In February, the jobless rate decreased to a two-year low of 3.8 percent. “These indicators imply that the March employment situation report will be similar to prior reports, which have shown solid job creation and continued decreases in the unemployment rate,” said Conrad DeQuadros, senior economic advisor at New York-based Brean Capital.