The number of Americans filing new claims for unemployment benefits increased to a 10-month high last week, suggesting the labour market was losing momentum and keeping hopes of a September interest rate cut from the Federal Reserve alive.
That was reinforced by other data from the Labour Department yesterday showing producer prices unexpectedly falling in May. The largest decline in prices at the factory gate since October followed news on Wednesday that consumer prices were unchanged in May for the first time in nearly two years.
The US central bank on Wednesday kept its benchmark overnight interest rate in the current 5.25-5.50 per cent range, where it has been since last July. Fed officials pushed out the start of rate cuts to perhaps as late as December, with policymakers projecting only a single quarter-percentage-point reduction for this year. But economists remained optimistic that the Fed would reduce borrowing costs twice this year, starting in September.
Initial claims for state unemployment benefits jumped 13,000 to a seasonally adjusted 242,000 for the week ended June 8, the highest level since last August, the Labour Department said.
The four-week moving average of claims, which strips out seasonal fluctuations, increased 4,750 to a nine-month high of 227,000. Unadjusted claims shot up 38,530 to 234,707, driven by a 10,311 surge in California. Some economists speculated that the jump could reflect layoffs after a minimum wage hike for fast food workers in the state came into effect in April.
In a separate report, the Labour Department’s Bureau of Labour Statistics said the producer price index for final demand decreased 0.2pc in May. That was the biggest drop in the PPI since October and followed an unrevised 0.5pc rise in April.
In the 12 months through May, the PPI gained 2.2pc after rising 2.3pc in April.
Goods prices fell 0.8pc, with a 7.1pc plunge in the cost of wholesale gasoline accounting for nearly 60pc of the decline. Goods prices rose 0.4pc in April. Wholesale food prices dipped 0.1pc as the cost of eggs declined. Excluding food and energy, goods prices climbed 0.3pc after gaining 0.2pc in April.
The cost of services was unchanged after accelerating 0.6pc in April. Transport and warehousing prices fell 1.4pc. Airline fares plunged 4.3pc. Portfolio management fees dropped 1.8pc, while hotel and motel room prices fell 0.5pc.
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