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U.S. LABOR MARKET: EYE OF THE HURRICANE?

A labor data double-header on Thursday supported the notion that the U.S. employment picture remains partly sunny, with tariff-related storms in the forecast.

Last week, 228,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI, marking a 5.4% weekly decrease and landing just 2,000 shy of consensus.

Initial claims remain low and rangebound, with the four-week moving average of initial claims moving essentially sideways.

Against the backdrop of volatile markets and uncertainties driven by policy chaos from the White House, why are the seas so calm on the surface?

"While the claims data has remained relatively firm, it only tells part of the story," says Jim Baird, Chief Investment Officer at Plante Moran Financial Advisors. "The uncertainty surrounding the near-term direction of the economy will undoubtedly make many employers think twice about adding to their payrolls."

"Given the hiring challenges that employers experienced in recent years, they’re not likely to cut workers at the first sign of trouble," Baird adds.

Ongoing jobless claims USJOBN=ECI, reported on a one-week lag, dipped by 1.5% to 1.879 million, or 7,000 fewer than analysts expected.

Still, continuing claims remain elevated - the pre-COVID average was around 1.7 million - and support recent consumer survey data suggesting laid-off workers are finding it increasingly difficult to find a replacement gig.

Separately, the Labor Department also released its preliminary take on first-quarter labor costs and productivity.

In the January-March period, unit labor costs USLCP=ECI— which gauge the average cost of labor per unit of output produced—grew at a 5.7% quarterly annualized rate, hotter than the 5.1% predicted by economists and a marked acceleration from the 2.0% growth in Q4 2024.

Productivity USPROP=ECI—which measures average output per hour—reversed as expected, contracting by 0.8% from the 1.7% growth seen over October-December.

Consensus called a 0.7% contraction.

"Weaker output and rising labor costs during Q1 adds another layer to the sluggish start for businesses to 2025," says Ben Ayers, senior economist at Nationwide. "While poor winter weather may have played a role in the softer readings, the drop in worker productivity likely increases caution from firms to invest or expand operations this year, especially given the elevated uncertainty surrounding tariffs and supply chains."

(Stephen Culp)

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FOR THURSDAY'S EARLIER LIVE MARKETS POSTS:

U.S. STOCKS CHEER EXPECTED TRADE DEAL WITH BRITAIN - CLICK HERE

CHIP STOCKS POWERING UP ON THE CHARTS CLICK HERE

US BULLS SAY ECONOMY WILL BOOM NO MATTER WHAT CLICK HERE

ALPHABET SHORT-SELLERS CLOCKED MORE THAN $800 MILLION IN PROFITS ON WEDNESDAY'S SLIDE CLICK HERE

MOVING ON UP CLICK HERE

EUROPE BEFORE THE BELL: DEAL TIME CLICK HERE

MORNING BID: ARMED CONFLICTS RAGE, BUT HOPES EMERGE FOR A TRADE WAR THAW CLICK HERE