Corporate profits

US weekly jobless claims plummet; corporate profits plummet in first quarter

Content of the article

WASHINGTON — The number of Americans filing new claims for unemployment benefits fell more than expected last week as the labor market remained tight amid strong demand for workers despite rising interest rates and tightening financial conditions.

Initial claims for state unemployment benefits fell from 8,000 to a seasonally adjusted 210,000 for the week ended May 21, the Labor Department said Thursday. The decline partially reversed some of the previous week’s surge, which had pushed claims to their highest level since January.

Advertisement 2

Content of the article

“Labour market data continues to indicate that demand for labor remains strong,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “That should limit layoffs for now.”

Economists polled by Reuters had forecast 215,000 applications for the past week. Some have blamed the recent increase in applications on less generous seasonal factors in May, the model used by the government to eliminate seasonal fluctuations in data, compared to the previous two months.

Others, however, believed some retailers were laying off workers. Several retailers, including Walmart Inc, cut their full-year profit forecasts last week, warning that inflation was cutting profits.

Advertisement 3

Content of the article

The weak profitability was confirmed Thursday by a separate report from the Commerce Department showing that company profits from current production fell to $66.4 billion, or a rate of 2.3%, in the first quarter. Domestic profits of financial corporations fell at a pace of $28.6 billion, while domestic profits of non-financial corporations fell at a pace of $21.1 billion. Profits from the rest of the market fell at a rate of $16.7 billion.

The Federal Reserve has raised its key rate by 75 basis points since March. The US central bank is expected to raise the key rate by half a percentage point at each of its next meetings in June and July.

This led to a sharp sell-off in the stock market and a surge in Treasury and dollar yields. Some fear that the Fed’s aggressive monetary policy could push the economy into recession next year.

Advertisement 4

Content of the article


The number of people receiving benefits after a first week of help rose by 31,000 to 1.346 million in the week ending May 14. But with a record 11.5 million job openings at the end of March, layoffs are likely to be minimal and people who lose a job can easily find another. Claims are down from a record high of 6.137 million in early April 2020.

Minutes from the May 3-4 Fed meeting released Wednesday showed officials said “demand for labor continues to outstrip available supply in many sectors of the economy and that their business contacts continued to report difficulties in hiring and retaining workers”. Many expected the labor market to remain tight and wage pressures to remain elevated for some time.

Advertisement 5

Content of the article

Higher wages, even if they lag behind inflation, help consumers keep spending and support the economy.

While the Commerce Department confirmed that the economy contracted in the first quarter under the weight of a record trade deficit and a slightly slower pace of inventory accumulation compared to the fourth quarter, other Growth measures were strong.

Gross domestic product fell at an annualized rate of 1.5 last quarter, the government said in its second GDP estimate, revised down from the 1.4% pace of decline reported in April. The economy grew at a healthy pace of 6.9% in the fourth quarter.

Final sales to private domestic buyers, which exclude trade, inventory and government spending, increased at a rate of 3.9%. This measure of domestic demand would previously have grown at a rate of 3.7%. The upward revision reflected a stronger pace of consumer spending than initially thought.

Advertising 6

Content of the article

Also underscoring the economy’s resilience, output grew at a 2.1% pace last quarter when measured on the revenue side. Gross domestic income rose 6.3% in the fourth quarter.

“Historically, when inflation is high and the Federal Reserve works hard to suppress it, recessions happen most often,” said Scott Hoyt, senior economist at Moody’s Analytics in West Chester, Pennsylvania. “But our proven recession indicators continue to signal that, while recession risks are indeed uncomfortably high, a recession is still not the most likely scenario for the US economy.” (Report by Lucia Mutikani edited by Nick Zieminski)



Postmedia is committed to maintaining a lively yet civil discussion forum and encourages all readers to share their views on our articles. Comments can take up to an hour to be moderated before appearing on the site. We ask that you keep your comments relevant and respectful. We have enabled email notifications. You will now receive an email if you receive a reply to your comment, if there is an update to a comment thread you follow, or if a user follows you comments. Visit our Community Rules for more information and details on how to adjust your E-mail settings.