Economy

U.S. labor market remains tight; business activity slowing

Published

4 days ago

June 23, 2022

U.S. labor market remains tight; business activity slowing

© Reuters. FILE PHOTO: People line up outside a newly reopened career center for in-person appointments in Louisville, U.S., April 15, 2021. REUTERS/Amira Karaoud/File Photo

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By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits edged down last week as labor market conditions remained tight, though a slowdown is emerging amid high inflation and rising interest rates.

Despite the second straight weekly decline reported by the Labor Department on Thursday, claims are hovering near a five-month high. There have been job cuts in sectors like technology and housing amid fears of a recession as the Federal Reserve aggressively tightens monetary policy to quell price pressures.

“The labor market’s best days are behind it,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

Initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 229,000 for the week ended June 18. Economists polled by Reuters had forecast 227,000 applications for the latest week. Claims have been treading water since tumbling to more than a 53-year low of 166,000 in March.

While agreeing there has been a loss of momentum in the labor market, some economists also blamed the stalled progress in claims on issues with the model used to strip out seasonal fluctuations from the data.

“The recent upward trend in the seasonally adjusted data has occurred mostly because unadjusted filings have not declined as much as the seasonal factors anticipated. Filings before seasonal adjustment have remained very low in recent weeks,” said Daniel Silver, an economist at JPMorgan (NYSE:JPM) in New York.

Unadjusted claims fell 3,255 to 202,844 last week. Illinois and Florida reported large declines in claims, which helped to offset a notable increase in Michigan.

The overall labor market remains tight. There were 11.4 million job openings at the end of April, with nearly two openings for every unemployed person. But with rising reports of companies freezing hiring and withdrawing employment offers, job openings are set to trend lower.

Stocks on Wall Street were mostly lower. The dollar advanced against a basket of currencies. U.S. Treasury prices rose.

GROWTH SLOWING

Despite the lack of progress, claims are at the average level seen in 2019. Economists say they would need to rise above the 250,000 mark on a sustained basis to raise alarm.

“There’s nothing obvious here that points to a weakening labor market,” said Isfar Munir, an economist at Citigroup (NYSE:C) in New York. “While anecdotal evidence is suggestive of more firms laying people off, especially tech firms, it remains to be seen in the hard data, and even when it does, it is unlikely to be large enough to shift the current narrative.”

The U.S. central bank last week raised its policy rate by three-quarters of a percentage point, its biggest hike since 1994. The Fed has increased its benchmark overnight interest rate by 150 basis points since March.

Fed Chair Jerome Powell told lawmakers the labor market was “sort of unsustainably hot.”

Recent retail sales, housing and manufacturing data suggest the economy is losing speed after appearing to have rebounded from the first quarter’s slump, which was mostly driven by a record trade deficit.

That was reinforced by a survey from S&P Global (NYSE:SPGI) on Thursday showing its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, dropped to 51.2 in June from a final reading of 53.6 in May.

A reading above 50 indicates growth in the private sector. Its flash composite orders index tumbled to 47.4, the first contraction since July 2020, from 54.9 in May.

Manufacturing activity in the region encompassing the western third of Missouri, Kansas, Colorado, Nebraska, Oklahoma, Wyoming and the northern half of New Mexico slowed further this month, a third report from the Kansas City Fed showed.

Some manufacturers said they were “expecting a big decrease in sales the last half of the year,” also noting that it “appears our customers over ordered and have excess

supply in the near term.”

Last week’s claims data covered the period during which the government surveyed establishments for the nonfarm payrolls component of June’s employment report. Claims rose moderately between the May and June survey periods.

The economy added 390,000 jobs in May. The claims report also showed the number of people receiving benefits after an initial week of aid increased 5,000 to 1.315 million during the week ending June 11.

Next week’s data on the so-called continuing claims, a proxy for hiring, will shed more light on June’s employment report. Employment is 822,000 below its pre-pandemic level, a gap economists expected will be closed in coming months.

“New filings increased between the May and June payroll reference weeks, suggesting that job growth continued to moderate,” said Ryan Sweet, a senior economist at Moody’s (NYSE:MCO) Analytics in West Chester, Pennsylvania. “This is what the Fed wants, as it wants the economy to cool off.”

Economy

Euro gains traction ahead of inflation data, dollar steadies

Published

26 mins ago

June 28, 2022

letizo News

Euro gains traction ahead of inflation data, dollar steadies

By Tom Westbrook

SINGAPORE (Reuters) – The euro won support on Tuesday as traders braced for European inflation figures to run hot this week and awaited a speech from central bank chief Christine Lagarde, while worries about a recession kept the U.S. dollar firm.

The euro rose 0.3% overnight and at one point poked above its 50-day moving average. It last sat at $1.0578.

The dollar held modest overnight gains on other currencies and traded at 135.37 yen and $0.6936 per Australian dollar early in the Asia session.

German inflation figures are due on Wednesday, French data on Thursday and euro zone numbers on Friday. European Central Bank President Lagarde is also due to speak at the ECB forum in Sintra, Portugal, at 0800 GMT on Tuesday.

“This set of inflation data will have a significant influence on the ECB’s monetary policy forward guidance, especially on the trajectory … of its interest rate hike cycle that is expected to kick start in July,” said CMC analyst Kelvin Wong.

Hike expectations have the euro trading firmly against the yen and it last bought 143.28 yen, close to last week’s seven-year high of 144.24. It also has momentum on sterling and has gained 1.2% this month to 86.15 pence.

The weak spot is against the Swiss franc which has rocketed to test parity on the common currency following a surprise rate hike by the Swiss National Bank earlier in June.

Moves elsewhere were modest as traders try and navigate between relief that signs of weakness in recent global economic data can moderate rate hikes, and worry that it could be a harbinger of the onset of a difficult period of stagflation.

Some of the heat has come out of bets on U.S. interest rate rises, with the peak in the Federal Reserve’s benchmark funds rate now seen hovering around 3.5% next year rather than 4% or above, but the dollar has not yet fallen far from lofty peaks.

The U.S. dollar index struck a two-decade high of 105.79 this month and was last steady at 103.93.

The risk-sensitive Australian and New Zealand dollars have been left behind in last week’s stock market bounce. The kiwi was steady at $0.6306 on Tuesday.

Sterling was similarly becalmed at $1.2274.

“Stay long the dollar until some of the uncertainty has reduced,” said Societe Generale (OTC:SCGLY) strategist Kit Juckes.

“The dollar will fall likely only when the global economy is on a more sustainable growth path … markets are forward-looking, but all we can see ahead today is danger.”

========================================================

Currency bid prices at 0130 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.0579 $1.0583 +0.00% -6.91% +1.0586 +1.0571

Dollar/Yen

135.3050 135.4600 -0.12% +17.63% +135.5850 +135.3000

Euro/Yen

143.15 143.35 -0.14% +9.84% +143.4500 +143.1300

Dollar/Swiss

0.9558 0.9562 -0.07% +4.75% +0.9567 +0.9555

Sterling/Dollar

1.2274 1.2265 +0.07% -9.24% +1.2283 +1.2263

Dollar/Canadian

1.2866 1.2872 -0.05% +1.76% +1.2878 +1.2858

Aussie/Dollar

0.6929 0.6925 +0.09% -4.65% +0.6938 +0.6918

Dollar/Dollar 0.6300 0.6302 -0.02% -7.96% +0.6307 +0.6293

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

Economy

UK’s Northern Ireland trade law clears first parliamentary hurdle

Published

4 hours ago

June 27, 2022

letizo News

UK's Northern Ireland trade law clears first parliamentary hurdle

© Reuters. FILE PHOTO: A truck drives past a ‘money changed’ sign for euro, sterling and dollar currencies on the border between Northern Ireland and Ireland, in Jonesborough, Northern Ireland, May 19, 2022. REUTERS/Clodagh Kilcoyne

LONDON/DUBLIN (Reuters) -Legislation allowing Britain to scrap some of the rules on post-Brexit trade with Northern Ireland on Monday passed the first of many parliamentary tests, as Prime Minister Boris Johnson pressed on with plans that have angered the European Union.

Despite some fierce criticism, lawmakers voted 295 to 221 in favour of the Northern Ireland Protocol Bill, which would unilaterally overturn part of Britain’s divorce deal from the EU agreed in 2020. The bill now proceeds to line-by-line scrutiny.

Tensions with the EU have simmered for months after Britain accused Brussels of insisting on a heavy-handed approach to the movement of goods between Britain and Northern Ireland – checks needed to keep an open border with EU member Ireland.

Johnson has described the changes he is seeking as “relatively trivial” and ministers insist the move does not break international law, but the EU has started legal proceedings against Britain over its plans.

“While a negotiated outcome remains our preference – the EU must accept changes to the Protocol itself,” Foreign Secretary Liz Truss said on Twitter (NYSE:TWTR) after the vote.

Asked if the changes set out in the new bill could be implemented this year, Johnson told broadcasters: “Yes, I think we could do it very fast, parliament willing”.

Johnson’s predecessor, Theresa May, was one of several from his Conservative Party to criticise their leader.

“This bill is not, in my view, legal in international law, it will not achieve its aims and it will diminish the standing of the United Kingdom in the eyes of the world, and I cannot support it,” she said.

Ahead of the vote, Irish Foreign Minister Simon Coveney said the bill would not lead to a sustainable solution and would only add to uncertainty in Northern Ireland.

“I am hugely disappointed that the British government is continuing to pursue its unlawful unilateral approach on the Protocol on Northern Ireland,” he said in a statement.

Johnson has a majority to push the law through the House of Commons, though the vocal group of rebels will add to concerns about his authority following his survival in a confidence vote on June 6 and the embarrassing loss of two parliamentary seats on Friday.

The bill will face a bigger challenge when it eventually moves to the upper house, the unelected House of Lords, where the government doesn’t have a majority and many peers have expressed concern about it.

Economy

U.S. stocks fall after recent big gains; oil, yields rise

Published

5 hours ago

June 27, 2022

letizo News

2/2

U.S. stocks fall after recent big gains; oil, yields rise

© Reuters. FILE PHOTO: Pedestrians wearing protective masks are reflected on an electronic board displaying various company’s stock prices outside a brokerage in Tokyo, Japan, February 25, 2022. REUTERS/Kim Kyung-Hoon

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By Caroline Valetkevitch

NEW YORK (Reuters) – U.S. stocks ended a volatile trading session slightly lower on Monday after posting sharp gains the week before, while oil prices and Treasury yields rose.

Oil climbed following last week’s rout, as the Group of Seven nations promised to tighten the squeeze on Russia’s finances with new sanctions that include a plan to cap the price of Russian oil.

Investors have been hoping oil’s slide from three-month peaks hit earlier in June could ease overall inflation concerns and allow the U.S. Federal Reserve to tighten policy less aggressively than initially feared.

Still, data on Monday showed new orders for U.S.-made capital goods and shipments increased solidly in May, pointing to sustained strength in business spending on equipment in the second quarter.

Stocks moved between gains and losses during the session on Wall Street, with big growth shares leading the way down.

“It’s not shocking given we’re in a bear market that last week was a good week and this week is turning out to be a bad week,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma, which has about $50 million in assets under management.

But given recent strong selloffs, “flat to down a little is progress,” he said.

The S&P 500 earlier this month confirmed it is in a bear market.

The Dow Jones Industrial Average fell 62.42 points, or 0.2%, to 31,438.26, the S&P 500 lost 11.63 points, or 0.30%, to 3,900.11 and the Nasdaq Composite dropped 83.07 points, or 0.72%, to 11,524.55.

The pan-European STOXX 600 index rose 0.52% and MSCI’s gauge of stocks across the globe gained 0.31%.

A further easing of COVID-19 restrictions in China helped to support global indexes.

Treasury yields climbed after the capital and durable goods orders surprised to the upside, but the sale of two- and five-year notes was weak.

The 10-year note rose 7 basis points to 3.194% and the two-year’s yield, which can herald rate expectations, gained 6.9 basis points to 3.126%.

Brent crude futures settled up $1.97, or 1.7%, at $115.09 a barrel, while U.S. West Texas Intermediate crude closed up $1.95, or 1.8%, at $109.57.

In foreign exchange, Russia’s rouble was volatile as Russia defaulted on its international bonds for the first time in more than a century, the White House and Moody’s (NYSE:MCO) credit agency said.

Also, the U.S. dollar edged lower versus its major rivals as investors weighed expectations on inflation and rate hikes. The euro was helped by expectations that the European Central Bank will soon raise interest rates for the first time in more than a decade.

The dollar index fell 0.058%, with the euro up 0.23% to $1.0578.

Cryptocurrencies stumbled. Bitcoin last fell 0.59% to $20,905.04.

Spot gold dropped 0.2% to $1,822.89 an ounce.