With a modest increase in jobless claims in March, unemployment remains at a two-year low of 3.6 percent.
Retail sales in the United States rose in March, mainly to higher fuel and food costs, but consumers are cutting down on discretionary spending due to high inflation.
The US Department of Commerce said on Thursday that retail sales increased by 0.5 percent last month. Data for February was revised higher to show sales gaining 0.8 percent instead of 0.3 percent as previously reported.
Economists polled by Reuters had forecast retail sales increasing 0.6 percent, with estimates ranging from as low as a 0.3 percent decline to as high as 2.2 percent jump.
Food and gasoline or petrol accounted for the bulk of the increase in sales last month. Retail sales are mostly made up of goods and are not adjusted for inflation.
The only service category in the retail sales report is restaurants and bars.
In March, consumer prices rose for the first time in 16 1/2 years, as Russia’s war against Ukraine drove up the price of fuel in the United States to new highs. According to the American Automobile Association, average gas prices hit an all-time high of $4.33 per gallon in March.
“Higher food and gas prices imply customers have fewer dollars to spend at other retailers,” said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina.
Despite the fact that growing prices are diminishing consumers’ purchasing power, rising earnings are helping to mitigate the impact of high inflation.
At the end of February, the unemployment rate was at a two-year low of 3.6 percent, and there were a near-record 11.3 million job opportunities, according to experts, making it easier for some cash-strapped Americans to take on a second job or pick up extra shifts.
A separate report released on Thursday by the US Department of Labor showed that initial applications for state unemployment benefits jumped 18,000 to a seasonally adjusted 185,000 for the week ending April 9. This emphasized tightening labor market conditions.
For the most recent week, economists predicted 171,000 applications. Claims have decreased from a high of 6.137 million in early April 2020, which was a record high.
Some customers are able to take on additional debt as a result of improved employment security. Another source of inflation protection is the large savings built up after the coronavirus outbreak.
