Initial jobless claims fell 6,000 to 422,000 during the week ended May 28. The underlying trend of initial jobless claims in the last two months has changed. The number of initial jobless claims has risen to 426,000 during May from 423,000 in April after an extended period of a decelerating trend (see Chart 2). These numbers suggest that labor market conditions remain worrisome. The reversal of initial jobless claims is consistent with the slowing trend visible in other recent economic reports.

The revised productivity report for the first quarter indicates that unit labor costs (+0.7%, year-over-year) are contained but have turned positive after a streak of eight quarterly declines (see Chart 3) Unit labor costs have a positive relationship with core inflation. The mild gain in the first quarter is not a threat but future gains of a larger magnitude will be indicative of inflationary pressures.

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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