Seasonal Distortions Increase Initial Jobless Claims in April

The jobless claims show a slight increase in April.

With the Easter holiday, jobless claim benefits stand at 230,000 reports the Labor Department, which is a three-month high. Economists had expected it to touch 215,000 for the week ended April 27. However, the seasonal distortion has inflated data.

With Easter falling on April 21 in 2019, it has brought a distortion in the jobless claim. Additionally, it is a spring break, where school workers and cafeteria workers do not get paid for the week and can claim benefits. There was a surge in the claim by 37,000 in the week prior to April 27.

Further, the Stop & Shop supermarket workers were on strike in New England which would have contributed partially to a surge in the claim.

Apart from these disruptions, the labor market remains strong, when compared to data from many decades.

The four-week average has witnessed an increase by 6,500 and rose to 212,500 the previous week. This is a yardstick which is considered as a better measure, as it measures the weekly volatility in the jobless claims.

Viewing this strength in the labor market, the Federal Reserve has kept interest rates unchanged on Wednesday. Despite pressure to cut interest rates, the improvement in the labor market has encouraged the Fed to hold on to current interest rates. If the strength continues in the economy, there are chances of a hike in rates towards the end of 2019.

The Federal Open Market Committee has stated that economic activity had seen a slowdown in the first quarter of 2019 but has picked up in the second quarter. Inflation is below the 2 percent target.

With low unemployment data, strong hiring and increasing wages, the U.S. economy continues to move in a positive direction. Though some sectors such as manufacturing are still showing soft growth, there is an overall positive outlook in the economy.

Leave a Reply

Your email address will not be published. Required fields are marked *