Aurelia Butler

Initial claims for state unemployment benefits rose 5,000 to a seasonally adjusted 245,000 for the week ended April 15. Economists polled by Reuters had forecast 240,000 claims for the latest week. The combination of spring breaks, which temporarily left support staff at some school districts unemployed, and people who have exhausted their severance packages following a rush of layoffs in technology and interest rate sensitive sectors, could account for part the rise in claims last week.While the labor market is slowing, claims at current levels suggest employment growth remains strong, allowing the Federal Reserve to raise interest rates one more time next month, before pausing the U.S. central bank’s fastest monetary policy tightening campaign since the 1980s.The Fed’s Beige Book on Wednesday described job gains as having “moderated somewhat” in early April “as several districts reported a slower pace of growth” than in recent reports. It also said contacts reported the labor market becoming less tight, noting “a small number of firms reported mass layoffs,” which were “centered at a subset of the largest companies.” Though the Beige Book reported that several districts noted that banks tightened lending standards, that has not yet been visible in economic data, including claims. Tighter credit conditions generally act with a lag on the economy. Economists expect the effects to be felt in the months ahead and many are forecasting a recession by the second half of 2023.The claims data covered the period during which the government surveyed households for the nonfarm payrolls portion of April’s employment report. Claims were little changed between the March and April survey weeks. The economy created 236,000 jobs in March, more than double what is needed to keep up with growth in the work-age population.Data next week on people receiving benefits after an initial week of aid, a proxy for hiring, will offer more clues on the state of the labor market in April. The so-called continuing claims increased 61,000 to 1.865 million during the week ending April 8, the claims report showed. Continuing claims remain low by historical standards as some of the laid off workers are quickly finding employment. There were 1.7 job openings for every unemployed person in February. More

MUMBAI (Reuters) – India’s current rate tightening cycle may not be over as more hikes could be warranted to align inflation towards the central bank’s medium term target of 4%, minutes of this month’s Monetary Policy Committee (MPC) meeting showed on Thursday.The MPC, comprising three members from the central bank and three external members, surprised markets by holding the key lending rate steady at 6.50% on April 6 in a unanimous decision, going against expectations for a 25 bps increase.”It is clear that the war against inflation has not yet been won, and it would be premature to declare an end to this tightening cycle,” MPC member Jayant Varma wrote.A poll conducted after the April 6 meeting showed the MPC will likely keep interest rates unchanged at least until the end of this fiscal year as it evaluates the delayed impact of previous hikes on economic growth and inflation.”We will continue to monitor all incoming information and undertake forward-looking assessment of the evolving economic outlook and stand ready to act, should the situation so warrant,” Governor Shaktikanta Das said.Most members appeared more concerned about inflation than in their commentary after the previous policy meeting in February when the bank raised rates by 25 bps. “Because of erratic weather and continuing global uncertainties, and until it is clear that inflation is well on the path to reaching the target, it is necessary to emphasise that this may not be the end of the rate hikes,” MPC member Ashima Goyal said.The decision by OPEC+ to cut crude output and the possibility of weak monsoon rains could both push up inflation in India and necessitate a monetary policy response, Varma said. “On the growth front, early warning signs of a possible slowdown are visible to a greater extent than in February. In the current situation of high inflation, monetary policy does not have the luxury of responding to these growth headwinds.”Reserve Bank of India Deputy Governor Michael Patra said the process of getting inflation back to target could turn out to be gradual and uneven, but the MPC should shepherd the process through potential bumps while containing second-round effects and anchoring inflation expectations. More

Shares fell nearly 1% in premarket trading as AmEx raised its provisions to $1.1 billion in the quarter compared with a benefit of $33 million a year ago.Stubborn inflation and a rapid rise in borrowing costs have begun to pinch customers of AmEx, which has so far been in a better position than its peers due to a wealthy customer base.”We’re mindful of the mixed signals in the external environment,” Chief Executive Stephen Squeri said.AmEx profit fell 13% to $1.8 billion, or $2.40 per share, for the three months ended March 31, missing analysts’ average estimate of $2.66 per share, according to Refinitiv data.The company, however, reaffirmed its profit forecast for 2023. It expects to earn $11 to $11.40 per share compared to analysts’ estimate of $11.10.”In the US, spending was solid both by consumers and small businesses. Our customers are showing resilience even in this uncertain environment that we’re all operating in,” finance chief Jeff Campbell told Reuters adding that he was not seeing any signs of a recession yet.Total revenue, excluding interest expense, rose 22% to $14.38 billion in the first quarter. More

The ECB said at that meeting that it expected inflation would gradually decline to its 2% target by 2025, wage rises would moderate while economic growth would pick up.But some of its 26 policymakers expressed doubts about what they called an “immaculate disinflation”, the ECB’s account of the March 15-16 meeting showed.”Some members argued that there was only a small probability that inflation would fall back to low levels as quickly as suggested in the March ECB staff projections, which gave the impression of an ‘immaculate disinflation’ (i.e. a return of inflation to target with very low cost in terms of lost output),” the ECB said in the account.It said “a number of members” of the Governing Council saw risks to the inflation outlook “as tilted to the upside over the entire horizon”.The ECB raised interest rates by 50 basis points at that meeting but it said the outlook was too uncertain to commit to more as a crisis was engulfing one of the world’s largest banks, Credit Suisse. The ECB’s chief economist, Philip Lane, said this week that financial tensions had since receded, meaning a rate hike was likely at the ECB’s next meeting on May 3-4.Sources have told Reuters the ECB’s seventh straight hike was likely to be smaller than previous ones at just 25 basis points due to lingering uncertainty about the financial sector and lagged effects from past increases in borrowing costs. WAGES AND PROFITSSome of Lane’s colleagues openly challenged the forecasts he presented at the meeting, including one for wage growth to average 5.3% this year before declining to 4.4% next year and 3.6% in 2025.”There were doubts about whether the projected lower wage growth towards the end of the horizon in the March projections was justified,” the ECB said.Others argued that it was consistent to revise down nominal wage growth while cutting inflation forecasts.A decomposition of the driver of core inflation showed that wage growth was becoming the main driver of underlying inflation and lately its contribution had been roughly twice as large as in 2019-20, a time of low inflation and salary moderation.But policymakers also considered the role of corporate margins in driving inflation, marking a shift in their public communication that had been reported by Reuters ahead of the meeting. “Members widely reiterated that developments in profits and mark-ups warranted constant monitoring and further analysis on an equal footing with developments in wages,” the ECB said.”Frequent references to wages in public communication did not imply that there was no consideration of profit margin developments.” More

PARIS (Reuters) – Euro zone inflation is too high and the European Central Bank’s monetary policy must strive to bring back inflation towards its 2% goal, ECB President Christine Lagarde said on Thursday.Lagarde made the comments at a conference held at French elite school Polytechnique in Paris. More

US Treasury secretary Janet Yellen is poised to call for a “constructive and fair” economic relationship between China and the US, as Washington seeks to salvage fraying ties between the two nations.In a speech on Thursday, Yellen is expected to warn Beijing that the US will keep resisting its “unfair” economic policies, but will add that Washington is not trying to “stifle” the Chinese economy with national security measures.Her comments come as relations between the powers are in their worst state in decades, having been derailed two months ago when a suspected Chinese spy balloon flew over the US.Yet while Yellen will call for a “healthy economic relationship” with China and describe the need to co-operate on issues from macroeconomics to climate change, her address will have a strong focus on Washington’s areas of concern.She will say that the US will continue to secure its national security interests and those of its allies and protect human rights, and will push back against the People’s Republic of China when necessary.“We will clearly communicate to the PRC our concerns,” Yellen plans to say, adding: “Our targeted actions may have economic impacts [but] they are motivated solely by our concerns about our security and values. Our goal is not to use these tools to gain competitive economic advantage.”China’s foreign ministry did not immediately respond to a request for comment.Referring to semiconductor-related export controls and other measures the Biden administration has taken, Yellen will say that safeguarding certain technologies from the Chinese military is of “vital national interest”.“[But] let me be clear, these national security actions are not designed . . . to stifle China’s economic and technological modernisation,” she will add.US and Chinese officials agree that the relationship has deteriorated to its lowest level since they were normalised in 1979, with tensions rising sharply over Taiwan as the US becomes more concerned about assertive Chinese military activity around the country. More recently, the US has grown anxious about apparent Chinese moves to target companies including Micron, the Idaho-based memory chipmaker.Beijing believes that Washington is trying to contain its rise by limiting its ability to develop a high-end semiconductor industry, and claims the US is helping Taiwan to resist its long-term plan to bring it under control. Chinese officials are also privately frustrated that their US counterparts weave critical language into speeches that are ostensibly about improving relations. In her remarks, however, Yellen will say that both countries “need to be able to frankly discuss difficult issues”.

When Joe Biden and Xi Jinping met at the G20 in November, the presidents agreed to efforts to set a “floor” under the relationship. They discussed a series of high-level exchanges that would start with Antony Blinken, secretary of state, visiting Beijing in February. But that plan was knocked off course when the spy balloon appeared over the US and Blinken abruptly cancelled what would have been the first visit to China by a Biden administration cabinet official in several years.Beijing has resisted rescheduling the visit over concerns that the FBI may soon release a report into the balloon. But in a rare positive sign, two senior commerce department officials, including China expert Elizabeth Economy, this month travelled to Beijing for talks about a possible visit later this year by Gina Raimondo, commerce secretary.In her speech, Yellen will also reject suggestions that the US is in decline, in an apparent indirect reference to statements by officials in China that, “the east is rising, while the west is declining”.“Pronouncements of US decline have been around for decades. But they have always proved wrong,” Yellen is expected to say.The former Federal Reserve chair will also stress that the countries need to work together on critical global issues despite their differences. “That’s what the world needs from its two largest economies”.Follow Demetri Sevastopulo on Twitter More