Weekly Unemployment Insurance Claims Increase, but Still Look Very Good
Labor market metrics continue to look good. Today’s data release of initial claims for unemployment insurance shows an increase of 7,000 initial claims for the week ending May 23, to hit a level of 282,000. This is still a very good number, consistent with ongoing tightening in overall labor market conditions. Also it is consistent with solid payroll job growth in May. The jobs report for May is due from the BLS next Friday morning, June 5 at 8:30 a.m. eastern time. I expect to see about 230,000 jobs added for the month, and the unemployment rate unchanged at 5.4 percent.
Labor markets look like they are again going in the right direction, after soft job growth in March. Assuming ongoing steady job growth, the Federal Reserve will feel satisfied about one of its two key criteria for interest rate lift-off. The second criterion is inflation returning to about a 2 percent year-over-year rate. A key part of the inflation outlook is the price of oil. Oil prices steady in the $55-60/bbl range will allow inflation to gradually pick up from its current near-zero year-over-year rate (as measured by headline CPI in April).
With ongoing moderate-to-strong job growth through the summer and stable-to-increasing oil prices, we still expect the Federal Reserve to announce the first increase in the fed funds rate in nine years on September 17.