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US Initial Claims Slow Further; May PPI Above Expectations

The US jobless claims data released earlier Thursday pointed to continued improvement for both new filings and existing filings, but the levels of both remain extremely high as even state reopenings have not been able to get displaced workers back on the job.

Those levels stand as a marker as to how deep the COVID-related shutdown cut into employment. The Paycheck Protection Program has helped some workers to return to their jobs, with the May payrolls number as evidence, but it will be an exceptionally long process.

The Labor Department reported that initial claims filings fell by 355,000 to a 1.542 million level in the current week, ahead of the 1.500 million level expected and following a small upward revision to the previous week’s level to 1.897 million.

The total number of unadjusted new claims filed since the start of the COVID-related shutdowns climbed to 40.4 million, though some of those could be refilings if workers returned to work and then got laid off again. That will be more common if companies that rehired workers in May to receive the PPP lay them off again when the money runs out.

Unadjusted claims fell by 82,886 in the current week, with the state data showing a large 97,187 decline in filings in Florida.

The Labor Department reported that 705,676 workers filed under Federal Pandemic Unemployment Assistance on an unadjusted basis, down from 91,137 in the previous week.

Continuing claims, those already receiving benefits, fell by 339,000 to 20.929 million in May 30 week after an increase of 427,000 in the previous week. The insured rate slipped to 14.4% from 14.6% in the previous week.

In other data released Thursday morning, headline wholesale prices were stronger than expected in May; when large jumps in food and energy prices are removed the core measure declined further.

While there are signs that state reopenings and some rehiring in May and June could draw sheltered consumers and businesses out, it will take some time to see that translate into strong upward core price movements.

Final demand PPI rose by 0.4% in May, above 0.1% increase expected, with a 4.5% rebound in energy prices the main reason.

Gasoline prices surged by 43.9% as the summer driving season got started, but that jump did not feed through to the consumer level, where gasoline prices fell by 3.5% in Wednesday’s CPI report.

One positive going forward for gasoline is that many consumers who usually choose airplanes to get to their summer vacation destinations will opt for the safety of their vehicles considering COVID-19.

Food prices were up 6.0% in the month after a 0.5% decline in the previous month. Prices of meat surged by 40%, with beef and veal prices up 69.1%. Unlike energy prices, some of the wholesale food price gains did feed through to the consumer level, which showed a 0.7% increase in Wednesday’s data.

Excluding the volatile food and energy components, PPI was down 0.1%, as expected. The BLS’s preferred core measure, which also excludes a 0.8% decline in trade services prices, rose 0.1% in the month.

Even with this month’s surprise increase, overall PPI prices stand 0.8% below their year ago level, while prices excluding food and energy were up only 0.3% year/year, both showing considerable weakness due to the lack of demand in March and April.

Kevin Kastner

Julie Ros

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