U.S. weekly jobless claims fall; consumer prices due to rise

10 Jun 2021

The number of weekly unemployment claims in the U.S. likely declined to a 15-month low last week, as consumer prices were hiked further in May.

The Labour Department is due to report on Thursday that initial claims for state unemployment benefits amounted to 370,000 for the week ended 5 June, compared to 385,000 the week before, as per a Reuters poll of economists.

This would mark the lowest level since the middle of March last year, and the sixth consecutive weekly decline.

In addition, economists forecast another Labor Department report out on Thursday will reveal the consumer price index (CPI) rose 0.4% in May following a 0.8% rise in April, the biggest gain since June 2009, Reuters reports.

The CPI is forecast accelerating 4.7% in the 12 months to May, the largest year-on-year rise since September 2008, and following on from a 4.2% rise in April.

Moreover, inflation may be boosted from employers hiking wages as they compete for sparse employees, despite the level of employment remaining 7.6 million jobs under the February 2020 peak.

There are currently 9.3 million unfilled positions, an all-time high.

Wages rose 0.5% last month, with substantial gains reported in the leisure and hospitality sector.

An acceleration to inflation will have no effect on U.S. monetary policy however, as Fed Chair Jerome Powell has said on several occasions that higher inflation will be transitory.

The U.S. central bank reduced its benchmark overnight interest rate to near zero in 2020 and has indicated it could endure higher inflation for some time to counter the years it remained under the 2% target.

According to Sam Bullard, Wells Fargo senior economist: "We have not yet seen the peak in inflation, but that should occur in the current quarter, though existing pressures should keep the year-over-year pace elevated for the remainder of 2021. 

"We expect inflation to slow more discernibly over the latter half of 2022, but with inflation expectations continuing to firm, core PCE inflation is expected to remain above 2.0% through our forecast horizon."