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Weekly jobless claims unchanged at 248,000

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Continuing claims increase 54,000 to 1.956 million

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Producer Price Index rebounds by 0.1% in May

By Lucia Mutikani

WASHINGTON, June 12 (Reuters) - The number of Americans

filing new applications for unemployment benefits held at an

eight-month high last week, consistent with easing labor market

conditions, while slowing domestic demand helped to restrain

producer prices in May.

In the absence of economic uncertainty caused by President

Donald Trump's aggressive tariffs on imported goods, the

softening labor market conditions and benign producer inflation

reported by the Labor Department on Thursday would support a

move by the Federal Reserve to resume its interest rate cuts

soon. The data was released a day after the Labor Department

reported a moderate rise in consumer prices in May.

Despite the tamer inflation readings, economists expected

inflation pressures to start building up from June through the

second half of the year as businesses pass on import duties to

consumers. Surveys, including from the U.S. central bank, have

suggested higher prices are coming.

The Fed is expected to leave its benchmark overnight

interest rate in the 4.25%-4.50% range at the end of its two-day

policy meeting next Wednesday.

"But it won't be the tariffs in place now that prevent the

Fed from cutting rates next week," said Chris Low, chief

economist at FHN Financial. "It is the chance trade talks might

collapse and tariffs might jump in coming months, causing a

supply shock that has the Fed sidelined."

Initial claims for state unemployment benefits held steady at a

seasonally adjusted 248,000 for the week ended June 7.

Economists polled by Reuters had forecast 240,000 claims for the

latest week. Claims could remain elevated, with the school year

ending this month as some states like Minnesota allow

non-teaching staff to collect benefits during the summer

holidays.

Though there have been no widespread layoffs as employers hoard

workers in an uncertain economic environment, the labor market

is losing steam. An immigration crackdown by the White House is

also slowing employment gains. Nonfarm payrolls increased by

139,000 jobs in May, down from 193,000 a year ago.

A lagging measure of employment, the Quarterly Census of

Employment and Wages (QCEW), has suggested a much slower pace of

job growth between April 2024 and December 2024 than reported in

the survey of establishments from which the nonfarm payrolls

data is compiled. Economists said that data partly reflected

reduced labor supply because of immigration restrictions imposed

by former President Joe Biden's administration in mid-2024.

The labor pool could continue to decline as the Trump White

House ramps up deportations. The QCEW data is derived from

reports by employers to the state unemployment insurance

programs. Economists said the data raised the possibility that

payrolls could be revised substantially down from April 2024

through May 2025. Much would, however, depend on the QCEW data

for the first quarter.

"All things considered, we think the 2025 benchmark revision

is most likely to revise down job gains from April 2024-March

2025 by 800,000 to 1.125 million, with the range for August's

preliminary benchmark announcement about 200,000 higher," said

Jonathan Millar, senior U.S. economist at Barclays.

"This would trim monthly payroll gains over the benchmark

period by about 65,000-95,000 per month relative to the current

estimate of approximately 150,000 per month."

Easing labor market conditions were reinforced by the claims

report, which also showed the number of people receiving

benefits after an initial week of aid, a proxy for hiring,

increased 54,000 to a seasonally adjusted 1.956 million during

the week ending May 31, the highest level since November 13,

2021. Recently laid-off workers are struggling to find work.

Stocks on Wall Street were trading higher. The dollar fell

against a basket of currencies. U.S. Treasury yields dropped.

GOODS PRICES RISE

A separate report from the Labor Department's Bureau of

Labor Statistics showed the producer price index for final

demand rose 0.1% in May after a revised 0.2% decline in April.

Economists had forecast the PPI would rise 0.2% after a

previously reported 0.5% drop in April. In the 12 months through

May, the PPI advanced 2.6% after rising 2.5% in April.

Wholesale goods prices increased 0.2% after gaining 0.1% in

April. Gasoline prices rebounded 1.6% while the cost of food

edged up 0.1% amid a 1.4% increase in egg prices. Excluding food

and energy, goods prices rose 0.2%, accounting for more than 80%

of the increase in the cost of goods.

Fresh fruit and vegetable prices fell, baffling some

economists.

"It is hard for me to understand the PPI figures," said

Stephen Stanley, chief U.S. economist at Santander U.S. Capital

Markets. "One would think that if there were any items in the

economy for which prices would be affected by tariffs in May, it

would have been fresh fruits and vegetables. My grocery shopping

experience is not at all consistent with these results."

There were, however, some signs of tariff-related price

increases. Prices for finished durable consumer goods jumped

0.4% after rising 0.2% for three straight months.

Services prices edged up 0.1% after falling 0.4% in April. A

0.4% rise in trade services, which measure changes in margins

received by wholesalers and retailers, was partially offset by a

0.2% decline in transportation and warehousing services.

Airline fares fell 1.1%, but prices for hotel and motel

rooms rebounded 1.4%. Portfolio management fees decreased 1.0%.

The cost of hospital outpatient care fell 0.3%, while doctor

visits were 0.2% more expensive.

Portfolio management fees, healthcare, hotel and motel

accommodation and airline fares are among the components that go

into the calculation of the core Personal Consumption

Expenditures Price Index, one of the inflation measures tracked

by the Fed for its 2% target.

With the CPI and PPI data in hand, economists estimated core PCE

inflation increased 0.1% in May for the third straight month. In

the 12 months through May, core PCE inflation was forecast to

rise 2.6% after gaining 2.5% in April.

"There are some disinflationary forces, including a

softening labor market," said Ryan Sweet, chief U.S. economist

at Oxford Economics. "But the Fed needs to carefully monitor

whether businesses opt to lay off workers to cut costs because

they're eating more of the tariffs than anticipated."