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U.S. Labor Market Sees Manufacturing Resilience Despite Rising Interest Rates

A classified advertising sign is seen outside a Starbucks in Manhattan, New York City, New York, USA, May 26, 2021. REUTERS/Andrew Kelly

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  • Weekly unemployment claims fall from 5,000 to 232,000
  • Recurring claims increased from 26,000 to 1,438,000
  • Layoffs announced by US-based companies fell 21% in August
  • Factory activities in August were stable.job recovery

WASHINGTON (Reuters) – The Federal Reserve has signaled it needs to continue to raise interest rates aggressively to slow the labor market. .

The most timely data on the health of the economy, the weekly unemployment claims report from the Labor Department on Thursday, also showed fewer people filed for unemployment benefits in the previous week than initial estimates.

Strong demand for workers was bolstered by Thursday’s Institute for Supply Management (ISM) survey, which showed manufacturing employment rebounded sharply in August after three straight months of contraction.

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According to ISM’s research, “Companies continued to hire at a high rate in August, with few signs of layoffs due to layoffs, hiring freezes and layoffs.”

The Federal Reserve (Fed) has hiked interest rates heavily to keep inflation in check by dampening demand across the economy.

“Employers are in a fierce race to fill vacancies, and even as demand dwindles, workers continue to thrive,” said Matt Coyer, an economist at Moody’s Analytics in Westchester, Pennsylvania. It is likely that we have secured the “Experience over the past year, a highly competitive labor market and a rapidly changing business cycle make companies reluctant to let workers go.”

Initial claims for state unemployment benefits fell by 5,000 to a seasonally adjusted 232,000 for the week ended Aug. 27, the lowest level since late June. The previous week’s data has been revised to show that 6,000 fewer applications were filed than previously reported. Economists polled by Reuters had forecast 248,000 applications in the most recent week.

Last week, the number of unadjusted unemployment claims fell by 2,492 to 176,793. Notable decreases were seen in Connecticut, Missouri, Oklahoma and Georgia. These declines offset strong increases in Massachusetts and New York.

The number of people receiving benefits after the first week of aid, proxy for employment, increased by 26,000 to 1.438 million in the week ending August 20.

Aggressive interest rate hikes by the US Central Bank increase the risk of recession. The Fed has raised its policy rate by 225 basis points since his March. So far, there are few signs that higher borrowing costs are cooling labor demand.

The government reported this week that there were 11.2 million job vacancies at the end of July, with two jobs for every unemployed person. Labor market resilience continues to dispel fears that the economy is in recession after contracting gross domestic product in the first half of this year.

Manufacturing PMI remained unchanged at 52.8 last month The ISM survey bolstered signs that the economy will continue to expand. A figure above 50 points to an expansion in manufacturing, which accounts for his 11.9% of the US economy.

ISM PMI

Five of the six largest manufacturing industries, including machinery, transportation equipment, computers and electronic goods, registered moderate to strong growth.

Computer and electronic product makers reported that “customer demand remains strong.” “Sales continue to be strong,” said a transport equipment maker.

While there were signs that supply bottlenecks were easing and inflationary pressures at the factory gates were easing, a shortage of machine makers continued.read more

“The feared recession doesn’t look imminent,” said Scott Murray, an economist at Nationwide in Columbus, Ohio.

U.S. factories have outpaced their global peers this month as manufacturing contracted in Europe and Asia.read more

low layoffs

Wall Street stocks were trading lower. Dollar rose against a basket of currencies. US Treasury prices fell.

The billing data falls outside the research week and is therefore not relevant to the August employment report due to be released on Friday. Nonfarm payrolls likely rose by 300,000 last month after jumping 528,000 in July, according to a Reuters poll of economists. is still tight.

Job cuts announced by US-based employers fell 21% to 20,485 in August, according to a separate report from global outplacement firm Challenger, Grey & Christmas on Thursday. Layoffs were up 30% year-on-year, but down 27% in the first eight months of the year compared to the same period in 2021.

The tech industry accounted for nearly a quarter of the job cuts announced in August. The tech company has announced 14,408 layoffs so far this year, a 70% jump from the same period last year. Overall, employers announced plans to hire 41,985 workers in August, a 65% increase from July.

Unemployment Claims and Challenger Gray

Economists expect job growth to slow, especially as worker productivity continues to plummet at an unsustainable rate, putting upward pressure on labor costs.

Lower productivity could also make it harder for the Fed to return inflation to its 2% target.

A separate Labor Department report said nonfarm productivity fell 4.1% at an annualized rate in the last quarter, an upward revision from the previously reported pace of contraction of 4.6% reported last month.

It fell 7.4% in the first quarter. Productivity fell by 2.4% from a year ago, instead of his 2.5% pace estimated last month. It was still the largest year-on-year decline since the government began tracking the series in the first quarter of 1948.read more

“The extent of the productivity decline looks incredible,” said Conrad Dequadros, senior economic adviser at Breen Capital in New York. “If productivity doesn’t pick up, this means serious cost pressures for businesses. This is not a promising situation for a timely return to 2% inflation.”

productivity and labor costs

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Reported by Lucia Mutikani.Editing: Chiju Nomiyama, Andrea Ricci, Paul Simao

Our standards: Thomson Reuters Trust Principles.

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