
People are afraid to change jobs
Perception is reality, and confidence is down
This one may be good.
So we have
falling unemployment claims and falling productivity.
The claims number is positive while the productivity number is bad.
On the third data point, labor costs, they are up, but that is slowing.
More important may be the psychology out there, with confidence falling, which
can depress consumption.
Also, as expected, the Fed deferred any rate cut at their last meeting.
The number of Americans filing new applications for unemployment benefits fell
sharply last week as the spring break-related boost from the prior week faded,
suggesting the labor market continued to chug along, though risks are mounting
from tariffs.
Employers are hoarding workers after difficulties finding labor during and
after the COVID-19 pandemic. But that could become tougher as other data from
the Labor Department on Thursday showed worker productivity dropping for the
first time in almost three years in the first quarter, lifting labor costs.
Though productivity was likely distorted by President Donald Trump's sweeping
import duties, which depressed output last quarter, it nonetheless highlighted
the economic risks wrought by the ever-shifting trade policy.
………
Initial claims for state unemployment benefits dropped 13,000 to a seasonally
adjusted 228,000 for the week ended May 3. Economists polled by Reuters had
forecast 230,000 claims for the latest week. The decline unwound some of the
surge from school spring breaks in New York state, which had lifted claims to
a two-month high.
………
The Federal Reserve on Wednesday kept its benchmark overnight interest rate in
the 4.25%-4.50% range. Fed Chair Jerome Powell told reporters "the tariff
increases announced so far have been significantly larger than anticipated,"
adding "if sustained, they're likely to generate a rise in inflation, a
slowdown in economic growth and an increase in unemployment."
………
WORKER HOARDING
Worker hoarding accounts for most of the labor market's resilience. Some
companies more exposed to the trade tensions have started laying off workers,
though on a small scale.
An Institute for Supply Management
survey
last week showed manufacturing employment remained depressed in April, noting
that "layoffs were the primary tools used, an indication that head-count
reduction is becoming more urgent."
Rising economic uncertainty has added to companies' hesitancy to hire more workers, leaving those who lose their jobs experiencing long bouts of unemployment.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 29,000 to a seasonally adjusted 1.879 million during the week ending April 26, the claims report showed.
………
In a separate report, the Labor Department's Bureau of Labor Statistics said nonfarm productivity, which measures hourly output per worker, fell at a 0.8% annualized rate in the first quarter. That was the first decline since the second quarter of 2022 and followed a 1.7% growth pace in the October-December quarter. Productivity grew at a 1.4% rate from a year ago.
The quarterly drop in productivity was flagged by the government's advance gross domestic product report for the first quarter published last week, which showed the economy contracting at a 0.3% rate, the first decline in three years.
Unit labor costs - the price of labor per single unit of output - jumped at a 5.7% rate in the first quarter after rising at a 2.0% rate in the October-December period.
The economy was swamped by a flood of imports as businesses rushed to bring in goods before tariffs kicked in.
It seems to me like we are on the cusp of something major happening, and I'd bet dollars to navy beans that it's not gonna be good.