US jobless claims at five-month high; import prices fall

WASHINGTON: The number of Americans filing for unemployment benefits rose to a five-month high last week, but this likely does not signal a deterioration in the labor market as the underlying trend remained consistent with tightening conditions.

Other data on Thursday showed cheaper crude oil and a strong dollar keeping imported inflation pressures subdued in November. The reports did not change views the Federal Reserve will raise interest rates next Wednesday for the first time in nearly a decade.

“As we approach the end of the year, jobless claims have a tendency to be more volatile due to seasonal adjustment issues around the holidays. The message remains that the pace of layoffs is very low,” said John Ryding, chief economist at RDQ Economics in New York.

Initial claims for state unemployment benefits increased 13,000 to a seasonally adjusted 282,000 for the week ended Dec. 5, the highest level since early July, the Labor Department said. The four-week moving average of claims, considered a better measure of labor market trends as it strips out week-to-week volatility, rose only 1,500 to 270,750 last week.

Claims have now been below the 300,000 threshold, which is normally associated with healthy labor market conditions, for 40 straight weeks. This is the longest stretch since the early 1970s. As the labor market approaches full employment there is probably little room for further declines.

The labor market remains resilient, despite slowing consumer spending and housing market activity.

US financial markets were little moved by the data. In another report, the Labor Department said import prices fell 0.4 percent last month after decreasing 0.3 percent in October. Import prices have dropped in 15 of the last 17 months, and were down 9.4 percent in the 12 months through November. Dollar strength and a sharp decline in oil prices have dampened inflation, leaving it running well below the Federal Reserve’s 2 percent target.

But there are hopes that labor market tightness will spur faster wage growth and gradually push inflation toward its target. The government reported last week that the economy added 211,000 jobs last month, keeping the unemployment rate at a 7-1/2-year low of 5.0 percent. Last month, imported petroleum prices fell 2.5 percent after rising 0.4 percent in October. Further weakness is likely following a recent slump in oil prices to seven-year lows.

“We expect import prices to decline further over the medium term as the effects of past dollar appreciation continue to weigh on prices,” said Rob Martin, an economist at Barclays in New York. “Ongoing economic weakness in many emerging markets combined with the recent further declines in commodity prices is likely to keep import prices from emerging markets declining for some time.”

The dollar has gained 18 percent against the currencies of the United States’ main trading partners since June 2014, making imports less expensive. Prices for Chinese imports fell 0.3 percent and were down 1.5 percent over the last 12 months, the biggest year-over-year decline since January 2010.

Import prices excluding petroleum slipped 0.3 percent last month after falling 0.4 percent in October. Imported food declined for a third straight month. The report also showed export prices decreased 0.6 percent last month after slipping 0.2 percent in October. They were down 6.3 percent in the 12 months through November.

US households: The net worth of US households fell in the third quarter as falling stock prices more than offset an increase in real estate values, according to a report by the Federal Reserve.

The value of corporate stocks dropped $2.3 trillion over the quarter, helping to drive total family net worth to $85.2 trillion compared to a revised $86.4 trillion in the period before, the Fed reported. The benchmark Standard & Poor’s 500 index peaked in May before plunging sharply in August as volatility in China hit markets worldwide, causing commodity prices to dip and raising doubts about future earnings growth.

Much of that value was recovered late in the quarter, and the Federal Reserve is expected to push ahead with an interest rate hike next week on confidence a domestic consumption driven recovery will continue.

Even as net worth fell in the third quarter, household borrowing rose at a 1.5 percent annual rate, the report showed. That’s a drop from the 4.2 percent growth in household debt recorded in the second quarter.

Services Data: US economic growth for the third quarter is likely to be revised lower after data on Thursday showed a bit less spending on services and software than previously estimated. The findings of the Commerce Department’s quarterly services survey, or QSS, come on the heels of data this month showing weaker manufacturing and wholesale inventories in September than the government had assumed in its second estimate of third-quarter GDP.

Before the QSS data, economists had expected that GDP growth for the July-September quarter would be trimmed to an annualized pace of 1.9 percent from a 2.1 percent rate.

Based on the QSS data, economists at Barclays and JPMorgan estimated another one-tenth of a percentage point would be subtracted from the GDP estimate. That means third-quarter GDP could be cut to a 1.8 percent rate when the government publishes its second revision later this month. “We estimate that real consumption growth will be revised down by one-tenth, to a 2.9 percent rate, and that real intellectual property investment will be revised down to a minus 2.4 percent rate from minus 0.8 percent,” said Jesse Hurwitz, an economist at Barclays in New York.



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