Tag Archives: Economy

Weak U.S. inflation, retail sales data dim rate hike prospects

FILE PHOTO - Prices are seen on replica Statues of Liberty figures in a shop window in New York City, November 14, 2011. REUTERS/Mike Segar

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices were unchanged in June and retail sales fell for a second straight month, pointing to tame inflation and soft domestic demand that diminished prospects of a third interest rate increase from the Federal Reserve this year.

Still, the economy likely regained speed in the second quarter after a sluggish performance at the start of the year. Other data on Friday showed industrial production picked up in June, driven by a surge in oil and gas drilling.

“Today’s reports imply that the Fed will go very slowly normalizing rates, but it also means that businesses will have to really hustle to find ways to keep earnings growing strongly,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The Labor Department said the unchanged reading in its Consumer Price Index came as the cost of gasoline and mobile phone services declined further. The CPI dropped 0.1 percent in May and the lack of a rebound in June could trouble Fed officials who have largely viewed the recent moderation in price pressures as transitory.

Policymakers are confronted with benign inflation and a tight labor market as they weigh a third rate hike and announcing plans to start reducing the central bank’s $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities.

In the 12 months through June, the CPI increased 1.6 percent – the smallest gain since October 2016 – after rising 1.9 percent in May. The year-on-year CPI has been retreating since February, when it hit 2.7 percent, which was the biggest increase in five years.

The so-called core CPI, which strips out food and energy costs, edged up 0.1 percent in June, rising by the same margin for three straight months. The core CPI increased 1.7 percent year-on-year after a similar gain in May.

The Fed has a 2 percent inflation target and tracks a measure which is currently at 1.4 percent.

Financial markets were pricing in a 47 percent chance of a 25 basis point rate hike in December, down from 55 percent before the data, according to CME Group’s FedWatch program.

As a result, the dollar fell, briefly touching a 10-month low against a basket of currencies. Prices for U.S. government bonds rose and stocks on Wall Street edged higher.

Fed Chair Janet Yellen told lawmakers on Wednesday that the recent cool-off in inflation was partly the result of “a few unusual reductions in certain categories of prices” that would eventually drop out of the calculation.

“We expect a little more cautious language from Fed officials on the inflation outlook going forward,” said Michael Hanson, chief economist at TD Securities in New York.

BROAD WEAKNESS

In June, gasoline prices fell 2.8 percent, decreasing for a second straight month. Food prices were unchanged after rising for five consecutive months. The cost of cellular phone services fell 0.8 percent, extending their decline amid price competition among service providers.

There were also decreases in airline fares and prices for apparel, household furnishings, new motor vehicles, and used cars and trucks. But rental costs rose, with owners’ equivalent rent of primary residence increasing 0.3 percent after advancing 0.2 percent in May.

Americans also paid more for hospital visits and prescription medication, as well as motor vehicle insurance.

Low prices are hurting retailers. A second report from the Commerce Department showed retail sales fell 0.2 percent last month, weighed down by declines in receipts at service stations, clothing stores and supermarkets.

Sales at restaurants and bars, as well as at sporting goods and hobby stores fell. May’s retail sales were revised to show a 0.1 percent dip instead of the previously reported 0.3 percent drop. Retail sales rose 2.8 percent year-on-year in June.

Excluding automobiles, gasoline, building materials and food services, retail sales slipped 0.1 percent last month after being unchanged in May. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Despite two straight months of decreasing retail sales, consumer spending likely gained steam in the second quarter after a helping to restrict economic growth to a 1.4 percent annualized rate in the first quarter. However, that could negatively impact third-quarter GDP.

“The weak trajectory of consumer spending at the end of second quarter adds some challenges to the third-quarter consumption outlook, which reinforces our view that growth will step down modestly in the current quarter,” said Michael Feroli, an economist at JPMorgan in New York.

That was supported by a third report showing a measure of consumer sentiment fell to a reading of 93.1 in early July from 95.1 in June. It has declined from a high of 98.5 in January.

The Atlanta Federal Reserve lowered its second-quarter growth estimate by two-tenths of a percentage point to a 2.4 percent rate following the inflation and retail sales data.

Still, growth in the second quarter likely got a lift from the industrial sector of the economy.

In a fourth report on Friday, the Fed said industrial production increased 0.4 percent in June amid robust gains in oil and gas drilling after nudging up 0.1 percent in May.

Industrial production increased at a 4.7 percent rate in the second quarter.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

Dollar edges lower versus yen before Yellen testimony; sterling off lows

A U.S. five dollar note is seen in this picture illustration June 2, 2017. REUTERS/Thomas White/Illustration

By Saikat Chatterjee

LONDON (Reuters) – The U.S. dollar fell against the yen and languished at 14-month lows against the euro on Wednesday ahead of Federal Reserve Chair Janet Yellen’s appearance in Congress to give testimony on monetary policy.

As investors sought to take profits after a recent dollar rally on the back of a broadly mixed session for risky assets, the greenback’s rise was also halted thanks to a softening of U.S. Treasury yields this week.

The dollar edged 0.4 percent lower against the yen to 113.43 <JPY=EBS> in early trades after rising more than 5 percent over the last month. It was trading at 1.14565 against the euro, its lowest level since early May. <EUR=EBS>

“The Yellen testimony remains the key event risk in today’s session but we remain optimistic about the dollar’s outlook and putting on a long position against sterling is the best way to execute that view,” said Adam Cole, head of FX strategy at RBC Capital Markets in London.

Yellen will give her semi-annual monetary policy testimony before Congress later on Wednesday and on Thursday, and investors will be parsing it for clues on when the Fed will start reducing its massive balance sheet.

Strategists at Brown Brothers Harriman don’t expect Yellen to break new ground in her testimony.

The Fed raised rates last month to a range of 1 percent to 1.25 percent and market expectations are roughly of a 50 percent probability that interest rates will rise again before the end of the year, according to the CME’s Fed watch data.

UK PROSPECTS

While there is a 50 percent probability for the Bank of England to raise interest rates too before the end of the year, markets are expecting the central bank to strike a dovish stance after recent soft data and comments from policymakers.

In an interview for a Scottish newspaper, the Press and Journal, published on Wednesday, Bank of England Deputy Governor Ben Broadbent said that while there was reason to see the bank moving towards higher rates, there were “a lot of imponderables”.

His comments pushed sterling to a two-week low against the dollar <GBD=D3> and to its lowest in eight months against the euro in early trading on Wednesday.

While subsequent wages data pulled sterling from the day’s lows, the outlook remained wary.

In other currencies, the Canadian dollar <CAD=> was slightly higher against its U.S. counterpart as investors awaited a Bank of Canada interest rate decision later on Wednesday.

(Editing by Gareth Jones)

U.S households see spending up, job prospects improving: New York Fed survey

- A shopper walks down an aisle in a Walmart Neighborhood Market in Chicago

WASHINGTON (Reuters) – Consumers expect to boost spending in the months ahead and voiced confidence they are more likely to find a job and less likely to lose one in a strong labor market, the New York Federal Reserve reported Monday in its latest monthly survey of consumer expectations.

Nearly 35 percent of the 1,300 heads of household included in the June poll said they were better off economically than a year go, a record in the four years the survey has been conducted.

The results bolster the current Fed outlook of an economy that continues to generate jobs despite tepid overall growth and some concern about a recent dip in inflation, improving chances the central bank can follow through with plans for a further interest rate increase later this year.

Though household expectations of inflation for the year ahead did dip slightly from the May survey, to 2.5 percent from 2.6 percent, respondents expect strong price increases of 2.8 percent over the coming three years. That’s consistent with the Fed’s current outlook that the recent weakness in inflation will prove temporary.

The survey also bolstered the view of continued strong consumption growth. Half of those polled said they expected to spend at least 3.3 percent more in the coming year, compared to median expected spending growth of 2.6 percent in the May survey. One-year-ahead expected earnings growth increased to 2.5 percent in the June survey from 2.2 percent in May.

Respondents also showed broad faith in the strength of the labor market, with a slight dip to 13.5 percent from 13.6 percent in the perceived probability of losing a job in the next year, and a jump to 59.2 percent from 56.7 percent in the probability of finding employment.

More than a fifth of respondents said they might leave a job voluntarily in the next year, up from 19.4 percent in May. Voluntarily job exits are considered a sign of a strong labor market that offers employees choices.

The online poll is designed to be a representative sample of the U.S. population. The New York Fed did not provide the margin of error for the poll.

 

(Reporting by Howard Schneider; Editing by Andrea Ricci)

 

Seven U.S. states still without budgets a week into new fiscal year

FILE PHOTO: A general view of the joint session of the General Assembly in the House Chambers of the Illinois State Capitol in Springfield, Illinois February 1, 2012. REUTERS/Sarah Conard/File Photo

By Robin Respaut and Karen Pierog

(Reuters) – Seven U.S. states are still without budgets, nearly a week into the new fiscal year that started July 1.

Legislatures in Connecticut, Illinois, Massachusetts, Pennsylvania, Oregon, Rhode Island and Wisconsin remain in disagreement about how to close ongoing budget gaps in their states or fund new budget initiatives.

“We always have some states that go into the new fiscal year without budgets, but the number is a bit high this year,” said Eric Kim, a director at Fitch Ratings.

Weak revenues complicated budget negotiations in several states, while idiosyncratic issues pushed others beyond their June 30 deadlines.

The Illinois House was poised to take final budget action on Thursday by attempting to override the governor’s vetoes of a $36 billion spending plan and $5 billion tax hike approved by the Democratic-controlled legislature over the Fourth of July holiday weekend. A hazardous materials situation in the state Capitol in Springfield delayed the House session, but officials determined the substance was harmless and lawmakers were returning.

If enacted, the budget would mark Illinois’ first complete budget since 2015. No other U.S. state has lacked a budget for that long.

Thirty-three of the 50 U.S. states reported revenues that came in below projections in fiscal year 2017, the highest number of states since the recession decimated budgets in 2010, according to the National Association of State Budget Officers.

Connecticut and Pennsylvania have the most challenging revenue situations, according to Fitch, as lower-than-anticipated tax collections exacerbated budget gaps and led to disputes over how to close them.

Massachusetts, also amid a revenue shortfall, enacted a one-month interim budget for July to provide additional time to negotiate a full-year budget. Wisconsin legislators are working to close a transportation funding shortfall.

Oregon’s budget process includes multiple bills, most of which have been approved. But the legislature is still debating several measures, including changes to hiring practices.

Rhode Island had appeared ready to finalize a budget by June 30, but late last week the state Senate amended a House proposal to phase out an automobile tax, causing the House to halt the budget process.

Many states retain the authority to make debt service payments without enacted budgets.

Over the holiday weekend, several states came to last-minute budget agreements.

New Jersey and Maine ended partial government shutdowns just in time for the Fourth of July holiday on Tuesday, while governors of Washington state and Alaska signed new operating budgets late last week, hours before deadlines that would have triggered partial government shutdowns.

(Reporting by Robin Respaut in San Francisco and Karen Pierog in Chicago; Editing by Leslie Adler)

U.S. job growth seen accelerating; unemployment rate steady

FILE PHOTO: Leaflets lie on a table at a booth at a military veterans' job fair in Carson, California October 3, 2014. REUTERS/Lucy Nicholson/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. employers likely stepped up hiring in June and boosted wages for workers, signs of labor market strength that could keep the Federal Reserve on course for a third interest rate increase this year.

According to a Reuters survey of economists, the Labor Department’s closely watched employment report on Friday will probably show that nonfarm payrolls increased by 179,000 jobs last month after gaining 138,000 in May.

The unemployment rate is forecast steady at a 16-year low of 4.3 percent. It has dropped five-tenths of a percentage point this year and matches the most recent Fed median forecast for 2017.

Economists say labor market buoyancy could also encourage the U.S. central bank to announce plans to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities in September.

“June’s employment report could provide sufficient evidence to Fed officials that they are still positioned to proceed with their monetary policy normalization plans in the second half of the year,” said Sam Bullard, a senior economist at Wells Fargo securities in Charlotte, North Carolina.

The Fed raised its benchmark overnight interest rate in June for the second time this year. But with inflation retreating further below the central bank’s 2 percent target in May, economists expect another rate hike only in December.

June’s anticipated employment gains would be close to the 186,000 monthly average for 2016 and reinforce views that the economy regained speed in the second quarter after a sluggish performance at the start of the year.

But the pace of job growth is expected to slow as the labor market hits full employment. There is growing anecdotal evidence of companies struggling to find qualified workers.

As a result, some companies are raising wages in an effort to attract and retain their workforces. Economists expect worker shortages to boost wage growth, which has remained stubbornly sluggish despite the tightening labor market.

EYES ON WAGES

Average hourly earnings are forecast increasing 0.3 percent in June after gaining 0.2 percent in May. That could lift the year-on-year increase in wages to 2.7 percent from 2.5 percent in May.

“The days of month after month of 200,000 jobs being created are likely behind us,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania.

“We will see trend job growth continue to moderate. That doesn’t necessarily signal that the expansion is running out of juice or that a recession is imminent, it is just a symptom of a full-employment economy.”

The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

Republican President Donald Trump, who inherited a strong job market from the Obama administration, has pledged to sharply boost economic growth and further strengthen the labor market by slashing taxes and cutting regulation.

But Republicans have struggled with healthcare legislation and there are also worries that political scandals could derail the Trump administration’s economic agenda.

Job gains were likely broad in June. Manufacturing payrolls likely rebounded after factories shed 1,000 jobs in May. But employment in the automobile sector probably declined further as slowing sales and bloated inventories force manufacturers to cut back on production.

Ford Motor Co has announced plans to slash 1,400 salaried jobs in North America and Asia through voluntary early retirement and other financial incentives. Others, like General Motors are embarking on extended summer assembly plant shutdowns, which will temporarily leave workers unemployed.

Further job gains are likely in construction.

The retail sector is expected to have purged jobs for a fifth straight month as department store operators like J.C. Penney Co Inc, Macy’s Inc and Abercrombie & Fitch struggle against stiff competition from online retailers led by Amazon.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. factory activity jumps, construction spending unchanged

A man walks his dog past a mural depicting factory workers in the historic Pullman neighborhood in Chicago

By Lindsay Dunsmuir

WASHINGTON (Reuters) – U.S. factory activity jumped in June suggesting economic growth in the second quarter gained some steam, while construction spending held steady in May.

The Institute for Supply Management (ISM) said on Monday its index of national factory activity rose to a reading of 57.8 last month from 54.9 in May.

A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for roughly 12 percent of the overall U.S. economy.

The ISM survey’s new orders sub-index rose to 63.5 in June from 59.5 the prior month. A measure of factory employment increased to a reading of 57.2 from 53.5 in May.

According to ISM, comments from those surveyed generally reflected expanding conditions, “with new orders, production, employment, backlog and exports all growing in June compared to May and with supplier deliveries and inventories struggling to keep up with the production pace.” Fifteen of the 18 manufacturing industries reported growth in June.

The dollar rose to a session high against a basket of currencies after the data, while the yield on the 2-year U.S. Treasury note rose to a more than eight-year high. U.S. stocks extended gains.

 

CONSTRUCTION SPENDING MIXED

Meanwhile, U.S. construction spending unexpectedly remained flat in May but federal government outlays on construction projects were the highest in more than four years.

The Commerce Department said on Monday that construction spending in May remained unchanged at $1.23 trillion. Spending in April was revised to show it declining 0.7 percent after a previously reported 1.4 percent fall.

Economists polled by Reuters had forecast construction spending rising 0.3 percent in May. Construction spending increased 4.5 percent from a year ago.

Federal government construction spending jumped 6.4 percent in May to its highest monthly level since January 2013.

The May construction spending release included revisions to data back to January 2015, the Commerce Department said.

In May, private construction spending fell 0.6 percent, the biggest decline since October 2015, after declining 0.2 percent in April. Investment in private residential construction also declined 0.6 percent, the biggest fall since July 2014, after rising 0.5 percent the prior month.

Spending on private nonresidential structures fell 0.7 percent in May, the fifth straight monthly decline.

Investment in public construction projects rose 2.1 percent in May after dropping 2.7 percent in April.

Outlays on state and local government construction projects increased 1.7 percent in May after falling 2.7 percent in April.

 

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)

 

Brazil cuts inflation target for first time in over a decade

Brazil's Central Bank President Ilan Goldfajn looks on during a news conference next to Brazil's Economy Minister Henrique Meirelles and Brazil's Planning Minister Dyogo Henrique de Oliveira in Brasilia, Brazil June 29, 2017. REUTERS/Ueslei Marcelino

By Silvio Cascione and Marcela Ayres

BRASILIA (Reuters) – Brazil’s government on Thursday lowered its annual inflation target for the first time in more than a decade, seeking to turn the page on recent double-digit jumps in consumer prices and bolster investors’ confidence about future economic stability.

The National Monetary Council, comprised of heads of the finance and planning ministries and the central bank, cut the inflation target to 4.25 percent in 2019 and 4.00 percent the following year, from 4.5 percent at present.

The tolerance range was maintained at 1.5 percentage point.

The reduction, predicted by a Reuters poll of economists in January, followed a plunge in annual inflation from nearly 11 percent in early 2016 to 3.6 percent in June.

A stronger commitment to low inflation could boost Brazil’s long-term growth by reducing investor uncertainty, without closing the door to further interest rate cuts by the central bank this year, economists said.

Economists forecast an inflation rate of 3.5 percent for 2017, breaking a sequence of seven straight years of Brazil overshooting its target. Under the administration of former President Dilma Rousseff, who was impeached last year, economists accused policymakers of pursuing the ceiling of the goal and not its midpoint in order to avoid rate hikes that could hurt growth.

“Economic policy has all the necessary conditions in terms of inflation, transparency and credibility to remain committed to these inflation targets,” central bank chief Ilan Goldfajn told journalists.

Yields <0#DIJ:> on longer-dated interest rate futures slipped in early trading, suggesting investors saw the new targets as consistent with forecasts of interest rate cuts. Global risk aversion pushed yields up again later in the day, traders said.

Growing investor optimism about Brazil’s economic prospects contrasts with an escalating political crisis that threatens to remove President Michel Temer from office.

Goldfajn said the targets took into account the political environment, and also responded affirmatively when asked if he expected to stay in his post even if Temer is suspended from office should the Supreme Court try him on corruption charges. Temer appointed Goldfajn to lead the central bank last year.

The central bank has been expected to cut its benchmark rate to 8.5 percent by December, from 10.25 percent currently, according to a central bank survey of economists released on Monday. The bank has already lowered the benchmark rate by 400 basis points since October.

Before the decision was announced, economists had been forecasting an annual inflation rate of 4.25 percent for the years of 2019, 2020 and 2021, according to the central bank.

“Expectations will probably start to converge toward the new target as soon as next week,” said Gustavo Arruda, an economist with BNP Paribas.

Brazil began targeting inflation in 1999, with the 4.5 percent target being first adopted for 2005.

Goldfajn had long said Brazil should aim for a target more in line with other emerging markets. Latin American countries such as Mexico and Chile target inflation at 3 percent.

(Reporting by Silvio Cascione and Marcela Ayres; Editing by W Simon and Daniel Flynn)

U.S. first quarter economic growth revised up on jump in consumer spending

FILE PHOTO: A customer exits after shopping at a Macy's store in the Brooklyn borough of New York, U.S., on May 11, 2017. REUTERS/Brendan McDermid/File Photo

By Lindsay Dunsmuir

WASHINGTON (Reuters) – The U.S. economy slowed less than feared in the first quarter due largely to a jump in consumer spending, providing a slightly more encouraging outlook for growth this year.

Gross domestic product increased at a 1.4 percent annual rate instead of the 1.2 percent reported last month, the Commerce Department said in its final assessment for the period on Thursday.

The reading was the worst since the second quarter of 2016 but above analysts’ expectations, easing fears the economy had been hobbled at the start of this year. The government had pegged first-quarter growth at a paltry 0.7 percent in its first estimate in April.

“The upward revision occurred even with a downward revision to the inventory data, which has favorable implications for the adding up of second-quarter growth,” said Daniel Silver, an economist at J.P. Morgan.

Economists polled by Reuters had expected GDP growth to be unrevised at 1.2 percent in the first quarter. The economy tends to underperform in that period relative to the rest of the year due to perennial issues with the calculation of the data. The government has said it is working to resolve those issues.

The U.S. dollar <.DXY> briefly edged up after the release of the data before retracing earlier losses against a basket of currencies. Prices of U.S. Treasuries were trading lower and stocks on Wall Street were down sharply.

First-quarter economic growth was boosted by an upward revision to consumer spending, which accounts for more than two-thirds of U.S. economic activity. Consumer spending rose at a 1.1 percent pace, the weakest reading since the second quarter of 2013 but almost double the 0.6 percent reported last month.

Despite the upward revision to GDP, the Trump administration’s stated target of swiftly boosting annual U.S. economic growth to 3 percent remains a challenge.

A sustained average growth rate of 3 percent has not been achieved in the United States since the 1990s. The U.S. economy has grown an average 2 percent since 2000 and it expanded only 1.6 percent in 2016, which was the weakest growth in five years.

President Donald Trump’s economic program of tax cuts, regulatory rollbacks and infrastructure spending has yet to get off the ground five months into his presidency.

Details of the White House’s tax plan remain sparse as Trump advisers attempt to win over fiscally conservative Republicans in Congress who want any changes to ultimately be revenue-neutral.

Initial signs that economic growth re-accelerated sharply in the second quarter have also faltered in the face of recent disappointing data on retail sales, manufacturing production and inflation. Housing data has also been mixed.

The Atlanta Federal Reserve is currently forecasting annualized growth of 2.9 percent in the second quarter.

LABOR MARKET STILL STRONG

Other data on Thursday showed the job market was still flashing a green light.

The Labor Department reported that the number of Americans filing for unemployment benefits last week rose slightly, but the underlying trend remained consistent with a tight labor market. The unemployment rate fell to a 16-year low in May.

U.S. exporters also flexed more muscle in the first quarter. Exports for the period were revised to show a 7.0 percent rate of growth from the previously reported 5.8 percent. Exports in the fourth quarter fell at a rate of 4.5 percent.

Business spending on equipment was revised to show it increasing at a rate of 7.8 percent in the January-March period rather than the 7.2 percent previously estimated.

Businesses accumulated inventories at a rate of $2.6 billion in the first quarter, rather than the $4.3 billion reported last month. Inventory investment rose at a rate of $49.6 billion in the fourth quarter of last year.

Inventories subtracted 1.11 percentage point from GDP growth in the first quarter instead of the 1.07 percentage point previously reported.

The government also reported that corporate profits after tax with inventory valuation and capital consumption adjustments fell at an annual rate of 2.7 percent in the first quarter after rising at a 2.3 percent pace in the prior three months.

(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)

Seattle employers cut hours after latest minimum wage rise, study finds

FILE PHOTO: Protest signs are pictured in SeaTac, Washington just before a march from SeaTac to Seattle aimed at the fast food industry and raising the federal minimum wage and Seattle's minimum wage to $15 an hour December 5, 2013. REUTERS/David Ryder/File Photo

By Alex Dobuzinskis

(Reuters) – A Seattle law that requires many businesses to pay a minimum wage of at least $13 an hour has left low-wage workers with less money in their pockets because some employers cut working hours, a study released on Monday said.

Low-wage workers on average now clock 9 percent fewer hours and earn $125 less each month than before the Pacific Northwest city set one of the highest minimum wages in the nation, the University of Washington research paper said.

Even so, overall employment at city restaurants, where a large percentage of low-wage earners work, held steady.

Seattle, which has a booming economy and a strong technology sector, is midway through an initiative to increase its minimum wage for all employers to $15 an hour. The city is at the forefront of a nationwide push by Democratic elected officials and organized labor in targeting $15 for all workers.

“Most people will tell you there is a level of minimum wage that is too high,” Jacob Vigdor, a professor of public policy at the University of Washington and director of the team studying the increase, said in a phone interview. “There is a sense that as you raise it too high, then you get to a point where employers will really start cutting back.”

Many companies reached that point after Seattle, a city of nearly 700,000 residents, raised the minimum to $13 an hour for large employers beginning Jan. 1, 2016, according to the study.

Seattle’s labor market held steady when the minimum rose to $11 from $9.47 on April 1, 2015, the university found in a study released last year.

“Raising the minimum wage helps ensure more people who live and work in Seattle can share in our city’s success, and helps fight income inequality,” Seattle Mayor Ed Murray said in a statement in response to the study, which the city commissioned.

The federal minimum wage has stayed at $7.25 an hour since 2009, and the Republican-controlled U.S. Congress has opposed an increase.

Critics of minimum wage increases say they lead to layoffs and force some companies out of business.

The latest research from the University of Washington found no major reduction in hours or jobs at Seattle restaurants, in keeping with a finding in a study conducted by University of California, Berkeley, that was released last week.

Lawmakers in California, the nation’s most populous state, voted last year to increase the minimum wage to $15 an hour by 2022. Elected officials in several states, including New York and Oregon, and large cities such as Chicago have in the last two years approved their own minimum pay hikes.

(Reporting by Alex Dobuzinskis in Los Angeles; Editing by Leslie Adler)

U.S. new home sales jump, median price surges to record high

A view of single family homes for sale in San Marcos, California October 25, 2013. REUTERS/Mike Blake

By Lindsay Dunsmuir

WASHINGTON (Reuters) – New U.S. single-family home sales rose in May and the median sales price surged to an all-time high, suggesting the housing market had regained momentum.

The Commerce Department said on Friday new home sales increased 2.9 percent to a seasonally adjusted rate of 610,000 units last month. April’s sales pace was also revised sharply higher to 593,000 units from 569,000 units.

Economists polled by Reuters had forecast new home sales, which make up about 10 percent of all home sales, rising 5.4 percent to a pace of 597,000 units last month. Sales were up 8.9 percent on a year-on-year basis in May.

“While the data quality of the new home sales report is notoriously poor, the general picture from this report and the existing home sales report is one of solid housing demand in the important spring selling season,” said Michael Feroli, an economist with J.P. Morgan.

The housing market has been bolstered by continued strong job growth. The unemployment rate fell to a 16-year low of 4.3 percent in May and mortgage rates are still favorable by historical standards.

However, an increase in the cost of building materials and shortages of lots and labor have crimped homebuilding. With demand outstripping supply, house prices remain elevated.

The median house price rose to a record high of $345,800 in May, from $310,200 in the prior month. The average sales price last month was $406,400, also a record high.

The U.S. dollar pared losses against the yen after the data. U.S. stocks were trading modestly higher while prices of U.S. Treasuries edged up.

Across the nation’s four regions, new home sales were mixed. They fell 25.7 percent in the Midwest and 10.8 percent in the Northeast, but rose 13.3 percent in the West and 6.2 percent in the South, which accounts for a large share of the housing market.

The inventory of new homes on the market increased 1.5 percent to 268,000 units last month.

At May’s sales rate, it would take 5.3 months to clear inventory, unchanged from April. A six-month supply is seen as a healthy balance between supply and demand.

(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)