US jobless claims near 44-year low; rate hike seen this month
WASHINGTON: The number of Americans filing for unemployment benefits fell to near a 44-year low last week, pointing to further tightening of the labour market even as economic growth appears to have remained moderate in the first quarter.
The stronger labour market and rising inflation could push the Federal Reserve to raise interest rates this month. Several Fed officials have in recent days suggested the US central bank could increase borrowing costs soon. “The jobs market is strengthening and we are near full employment. The Fed is worried that the jobs market will overheat and that is fanning the discussion of a March rate hike,” said Ryan Sweet, senior economist at Moody’s Analytics in Westchester, Pennsylvania
Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 223,000 for the week ended February 25, the lowest level since March 1973, the Labour Department said on Thursday.
It was the 104th straight week that claims remained below 300,000, a threshold associated with a healthy labour market. That is the longest stretch since 1970, when the labour market was much smaller. It is now at or close to full employment, with an unemployment rate of 4.8 per cent.
Economists had forecast new claims for unemployment benefits dipping to 243,000 in the latest week. The government reported on Wednesday that the personal consumption expenditures (PCE) price index jumped 1.9 per cent in the 12 months through January, the biggest gain since October 2012. The PCE price index increased 1.6 per cent in December.
The core PCE, the Fed’s preferred inflation measure, increased 1.7 per cent, still below its 2 per cent target.
With more voices joining the chorus of Fed officials signalling further monetary policy tightening soon, financial markets have almost fully priced in a rate hike at the central bank’s March 14-15 policy meeting. Fed Chair Janet Yellen could offer more clues on Friday when she speaks on the economic outlook in Chicago. The Fed raised its benchmark overnight interest rate last December and has forecast three rate increases for this year.
The dollar rose to a seven-week high against a basket of currencies after the data, while prices for US government debt fell. Stocks on Wall Street slipped as investors took profits after a huge rally on Wednesday that propelled the Dow Jones Industrial Average above 21,000 for the first time.
The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 6,250 to 234,250 last week, the lowest reading since April 1973.
A survey from the Fed on Wednesday showed the labour market remained tight in early 2017, with some of the central bank’s districts reporting “widening” labour shortages.
“Workers are not being laid off in large numbers,” said Rob Martin, an economist at Barclays in New York.
The labour market strength comes despite signs the economy struggled to gain momentum early in the first quarter after slowing in the final three months of 2016. Data this week showed tepid growth in consumer spending in January, weak equipment and construction spending, and a wider goods trade deficit.
The Atlanta Fed is forecasting first-quarter gross domestic product rising at a 1.8 per cent annualised rate. The economy grew at a 1.9 per cent pace in the fourth quarter. Thursday’s claims report also showed the number of people still receiving benefits after an initial week of aid increased 3,000 to 2.07 million in the week ended February 18. The four-week average of the so-called continuing claims edged up 750 to 2.07 million.
The continuing claims data covered the survey week for February’s unemployment rate. The four-week moving average of claims fell 21,500 between the January and February survey periods, suggesting an improvement in the jobless rate.