Applications for unemployment benefits rose by 22,000 to 264,000 in the most recent week, the largest number since October 2021, following a series of dramatic staff cuts among Microsoft, Twitter, and other tech giants as well as companies in finance and other industries.
In April, producer prices—what it costs businesses to deliver their products and services—grew by 2.3 percent, down from 2.7 percent in March and the slightest since January 2021.
The two statistics highlight the U.S. economy’s continued slackening.
“As the second half of 2023 wears on, producers may find their customers unable to weather higher costs,” Kurt Rankin, an economist at PNC Financial Services, said to The Wall Street Journal.
“Job cuts have already begun to spread beyond tech and financial services as businesses anticipate weaker demand and adjust their outlooks,” he noted.
Consumer prices also slowed their pace of increase last month, edging back to 4.9 percent from 5.0 percent in March.
In addition, U.S. GDP grew by a feeble 1.1 percent in this year’s first quarter and consumer spending flatlined in February and March.
TREND FORECAST: As we have detailed in our ECONOMIC UPDATEsection of this issue of The Trends Journal, while The Street is betting on a pause in interest rate hikes and the new figures make it more likely that the U.S. Federal Reserve will pause its series of rate hikes at its next meeting in mid-June… the Fed-Heads are singing a different tune; more rate hikes.
The Fed claims it has been trying to find the balance point between slowing inflation while avoiding recession. After the central bank’s rate-setting committee met early this month, Fed chair Jerome Powell said “we feel like we’re getting closer” to pausing “or maybe even there.”
As of 11 May, markets were pricing in a 97-percent chance of a pause.
A pause would be a gamble: stable interest rates could lead to a surge in buying, especially among pricey items usually requiring installment payments, such as homes and cars.
That could rekindle inflation, in which case the Fed would hike rates yet again, rattling the economy and raising the likelihood of inflation.
If the Fed pauses its campaign of rate hikes, that is no guarantee that the pause will hold.