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Omicron Wave Raises Weekly Unemployment Claims in US; monthly producer inflation slows

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WASHINGTON – The number of Americans filing new jobless claims rose to an eight-week high in the first week of January amid raging COVID-19 infections, but remained at a a level compatible with a rapidly tightening labor market.

The Labor Department’s weekly jobless claims report on Thursday also offered more evidence that the labor market was at or near maximum employment. The state’s unemployment benefit numbers at the start of the year were the lowest since 1973. There are signs that the worst of high inflation is likely over, with producer prices at their lowest. gain in 13 months in December.

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The contraction of the labor market and strong pressure on prices left economists to anticipate that the Federal Reserve would raise interest rates in March.

“The increase in claims likely reflects an increase in layoffs due to the increase in COVID cases,” said Nancy Vanden Houten, chief US economist at Oxford Economics in New York. “Claims may remain high in the short term, but we expect them to return to the 200,000 level once the Omicron wave passes.”

Initial claims for state unemployment benefits rose from 23,000 to 230,000 seasonally adjusted for the week ended Jan. 8, the highest figure since mid-November. Economists polled by Reuters had forecast 200,000 candidates for last week.

An increase in coronavirus cases, driven by the Omicron variant, has disrupted airline activity at schools as workers make themselves sick. Unadjusted claims jumped from 103,693 to 419,446 last week.

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They were driven by power surges in New York City, which has seen cases soar. There were also large increases in deposits in California, Florida, Kentucky, Missouri, Tennessee, Texas, Utah and Indiana. But demands have dropped significantly in Connecticut, Massachusetts and Michigan.

Omicron infections are starting to decline in New York City and other metropolitan areas. Claims have declined from a record 6.149 million in early April 2020 and remain close to their pre-pandemic levels.

Employers are hanging on to their employees, with 10.6 million job offers at the end of November.

The Fed’s Beige Book report on Wednesday of anecdotal information on business activity, gathered from contacts nationwide by Jan. 3, showed that many were allowing part-time work or adjusting qualifications. ” to attract more candidates and retain the existing workforce “.

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With more workers coming off the unemployment benefit lists, the labor pool could expand. The claims report showed that the number of people receiving benefits after a first week of aid fell from 194,000 to 1.559 million in the week ended Jan. 1. This was the lowest figure for these alleged continuing claims since the week ending June 2, 1973.

The government announced last Friday that the unemployment rate fell to a 22-month low of 3.9% in December. The workforce is around 2.2 million people smaller than before the pandemic.

Wall Street stocks were mostly trading higher. The dollar fell against a basket of currencies. US Treasury prices have gone up.

RAYS OF HOPE

In another report released Thursday, the Labor Department said the producer price index for final demand rose 0.2% last month. This is the weakest gain in the PPI since November 2020 and follows a 1.0% jump in November.

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The PPI was held back by a 0.4% drop in goods prices, the first drop since April 2020. This reflected lower food and energy prices. The prices of goods advanced 1.1% in November. Excluding food and energy, prices for goods rose 0.5% after increasing 0.8% in November.

Prices for services rose 0.5% after accelerating 0.9% in November. In the 12 months to December, the PPI rose 9.7% after climbing 9.8% in November.

Excluding the volatile components of food, energy and commercial services, producer prices rose 0.4% in December. The so-called core PPI climbed 0.8% in November. In the 12 months to December, the core PPI rose 6.9%, matching the increase in November.

“Monthly price increases are slowing but still high, and the Fed will not deviate from its path to complete its cut in March and start raising rates this year,” said Will Compernolle, senior economist at FHN Financial in New York. York.

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The government said on Wednesday that consumer prices climbed 7% year-on-year in December, the largest increase since June 1982.

With PPI and CPI data in hand, economists predict that the core personal consumption expenditure (PCE) price index rose about 0.5% in December, bringing the annual increase to 4.9. % against 4.7% in November.

The core PCE price index is one of the measures the Fed is watching for its 2% inflation target.

Inflation is rising as COVID-19 and the recovery from the pandemic have caused bottlenecks in the supply chain. There are encouraging signs that the supply impasse could end.

A survey by the Institute for Supply Management last week showed that manufacturers were reporting improved deliveries from their suppliers in December, although the surge in Omicron infections poses a risk to supply chains. Data on Tuesday showed that ex-factory prices in China rose more slowly than expected in December.

“A certain slowdown in the Chinese PPI will have implications for US inflation by partially reducing commodity prices,” said Bernard Yaros, economist at Moody’s Analytics in West Chester, Pa. “Chances are, the first place where weaker Chinese PPI growth will show up in the United States is in import prices, then producer prices, and finally consumer prices.”

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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