US unemployment demands fall; The economic contraction was confirmed in the first quarter

Queue for a job exhibition in Uniondale, New York

WASHINGTON (Reuters) – The number of Americans filing new demands for unemployment benefits fell last week in line with the labor market, which has remained tight amid strong demand for workers despite rising interest rates.

The Department of Labor said on Thursday that initial unemployment claims fell by 8,000 to 210,000 in the week ended May 21. This decline partially offsets part of the previous week’s rise.

Economists surveyed by Reuters forecast 215,000 claims last week.

Some attributed the recent increase in claims to less generous seasonal factors in May to the pattern the government has been using to exclude seasonal fluctuations from data from the previous two months.

However, others believe that some retailers are laying off workers. Several retailers, including Walmart Inc, last week lowered their full-year profit forecasts and warned that inflation was squeezing profits.

The Federal Reserve has raised its interest rate to 0.75 percent since March. The US Federal Reserve is expected to raise interest rates by 0.5 percent at each meeting in June and July. This led to strong sales in the stock market and increased yields on the treasuries and the dollar.

But with 11.5 million jobs available by the end of March, layoffs will be minimal and those who lose their jobs can easily find another. Claims fell to an all-time low of 6.137 million at the beginning of April 2020.

Minutes of the May 3-4 Fed meeting released on Wednesday, officials commented that “labor demand in many sectors of the economy continues to exceed supply and their business relationships continue to indicate difficulties in hiring and retaining workers.” Many expected the labor market to be tight and wage pressures high for some time to come.

Higher wages, despite lagging behind in inflation, help keep consumer spending and the economy afloat.

In a separate report on Thursday, the trade sector said the economy contracted under the weight of record trade deficit in the first quarter and confirmed a slightly slower pace of inventory structure compared to the fourth quarter.

The government said in its second GDP estimate that GDP fell at an annual rate of 1.5% in the last quarter. The results were revised from the 1.4% decline rate announced in April. The economy grew at a strong pace of 6.9% in the fourth quarter.

(Report by Lucia Muttigani)