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US labor market stays tight; business activity cooling

Despite the second straight weekly decline reported by the Labor Department on Thursday, claims are hovering near a five-month high. There have been job cuts in sectors like technology and housing amid fears of a recession as the Federal Reserve aggressively tightens monetary policy to quell price pressures.

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WASHINGTON -- The number of Americans filing new claims for unemployment benefits edged down last week as labor market conditions remained tight, though a slowdown is emerging amid high inflation and rising interest rates.

Despite the second straight weekly decline reported by the Labor Department on Thursday, claims are hovering near a five-month high. There have been job cuts in sectors like technology and housing amid fears of a recession as the Federal Reserve aggressively tightens monetary policy to quell price pressures.

"The labor market's best days are behind it," said Christopher Rupkey, chief economist at FWDBONDS in New York.

Initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 229,000 for the week ended June 18. Economists polled by Reuters had forecast 227,000 applications for the latest week. Claims have been treading water since tumbling to more than a 53-year low of 166,000 in March.

While agreeing that there has been a loss of momentum in the labor market, some economists also blamed the stalled progress in claims on issues with the seasonal factors, the model used by the government to strip out seasonal fluctuations from the data.

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"The recent upward trend in the seasonally adjusted data has occurred mostly because unadjusted filings have not declined as much as the seasonal factors anticipated. Filings before seasonal adjustment have remained very low in recent weeks," said Daniel Silver, an economist at JPMorgan in New York.

Unadjusted claims fell 3,255 to 202,844 last week. Illinois and Florida reported large declines in claims, which helped to offset a notable increase in Michigan.

The overall labor market remains tight. There were 11.4 million job openings at the end of April, with nearly two openings for every unemployed person. But with rising reports of companies freezing hiring and withdrawing employment offers, job openings are set to trend lower.

Federal Reserve Chair Jerome Powell told lawmakers on Thursday that the labor market was "sort of unsustainably hot."

Recent retail sales, housing and manufacturing data suggest the economy is already losing speed after appearing to have rebounded from the first quarter's slump, which was mostly driven by a record trade deficit.

Last week's claims data covered the period during which the government surveyed establishments for the nonfarm payrolls component of June's employment report. Claims rose moderately between the May and June survey periods.

The economy added 390,000 jobs in May. The claims report also showed the number of people receiving benefits after an initial week of aid increased 5,000 to 1.315 million during the week ending June 11

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Related Topics: BUSINESSECONOMYJOBS
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