Recovery Challenging but Looking Good for Interest Rates
Trying to recover from the toughest recession since the 1930s is proving to be a challenge for the U.S. labor market. The Labor Department said claims for unemployment benefits rose from 12,000 to 472,000 since education, construction and manufacturing cuts began. The increase in jobless claims proves that recovery from the recession will be moderate. Jim Demasi, chief fixed income strategist at Stifel Nicolaus & Co., said the U.S. is not going to see major job or GDP growth needed to generate inflation, therefore recovery is not going to come easy.
The new claims for jobless aid rose while consumer prices notched their largest decline in nearly 1-1/2 years last month. These statistics suggest interest rates will remain at historic lows, making the challenging recovery slightly optimistic and allowing for expansion to continue at a reasonable pace. Due to the continuation of high unemployment rates and claims for jobless aid, the Federal Reserve is expected to extend the offer period for low interest rates.
The debt crisis which began in Europe has many financial markets concerned that the crisis will spread. European governments have already started slowing their economies and are looking to take some of the U.S. growth. After being flat in April, the measure of consumer inflation was given a boost by an increase in costs of hotels, tobacco, clothing, medical care and more. The increases have been in line with market expectations.