Jobless claims trend downward as commodity prices rise

Economic Outlook

The Federal Reserve released minutes from its April policy meeting on Wednesday. The board voted unanimously to maintain current policies of buying $120 billion worth of Treasury and mortgage bonds each month in addition to holding rates near zero. This vote came prior to more recent economic data indicating a surge in inflation and constrained supply chains. While Fed officials have repeatedly stated their view that higher inflation this year will prove to be temporary, the minutes also indicated that the group may discuss plans for reducing their bond buying program at future meetings. Yields on 10-year Treasury notes rose as high as 1.69% on Wednesday after minutes were released. The U.S. dollar rallied on Wednesday based on the potential for Fed tightening, only to self-correct by the end of the week.

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Initial jobless claims continued their downward trend, dropping to 444,000 and establishing a new low since the pandemic started in mid-March 2020. For context, the pre-pandemic record was 695,000, recorded in 2009, with pandemic highs totaling 6.1 million in April 2020. This continued decline comes along with news that more states, now a total of 22, have planned to opt out of weekly $300 supplemental federal unemployment benefits. For individuals in those states this would end the additional $300 weekly payments by mid-June or July, ahead of the current September expiration date.

Commodities

The price of crude oil rose slightly throughout the week until it dropped by $2 per barrel on Wednesday. The drop was due to concerns over a slowdown in manufacturing caused by increasing COVID case numbers in Asian countries. Additional downward pressure was fueled by fears that recent increases in inflation expectations could cause the Fed to hike interest rates sooner than expected. Signs of those inflation expectations can be seen in the price of oil, corn and gasoline futures, each of which have doubled from a year ago with lumber more than tripling in price based on data provided to the Wall Street Journal.^*

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Looking Ahead

We will look to see how the market views the U.S. recovery when the consumer confidence index is released on Tuesday. That will be followed by core inflation numbers released on Friday.

^{*Source: FactSet}