US data flow sug­gests econ­omy re­gain­ing steam

The Pak Banker - - MARKETS/SPORTS -

The num­ber of Amer­i­cans fil­ing for un­em­ploy­ment ben­e­fits un­ex­pect­edly rose last week, but the un­der­ly­ing trend con­tin­ued to point to a strength­en­ing la­bor mar­ket.

The la­bor mar­ket op­ti­mism was, how­ever, dimmed some­what by a sur­vey on Thurs­day show­ing em­ploy­ment in the ser­vices in­dus­tries fell in Fe­bru­ary for the first time in two years, even as the over­all sec­tor con­tin­ued to ex­pand.

But econ­o­mists cau­tioned against read­ing too much into the drop, not­ing that past de­clines had not trans­lated into over­all la­bor mar­ket weak­ness. "At first glance that is a con­cern ... but we've seen this hap­pen with the em­ploy­ment in­dex be­fore. There are also no other signs that ser­vice sec­tor hir­ing is slow­ing," said Paul Ash­worth, chief U.S. econ­o­mist at Cap­i­tal Eco­nom­ics in Toronto.

Ini­tial claims for state un­em­ploy­ment ben­e­fits in­creased 6,000 to a sea­son­ally ad­justed 278,000 for the week ended Feb.27, the La­bor Depart­ment said. Econ­o­mists had fore­cast claims slip­ping to 271,000 in the lat­est week.

Claims have now been below the 300,000 thresh­old, which is as­so­ci­ated with healthy la­bor mar­ket con­di­tions, for a year. That is the long­est pe­riod since the early 1970s. The four-week mov­ing av­er­age of claims, seen as a bet­ter­mea­sure of la­bor mar­ket trends, fell to the low­est level since late Novem­ber - in­di­cat­ing no stress in the jobs mar­ket de­spite fi­nan­cial mar­ket con­di­tions hav­ing tight­ened af­ter fears of re­ces­sion sparked a global stock mar­ket sell-off.

"Through some of the ups and downs in the weekly se­ries, it looks like the trend in ini­tial claims has im­proved over the past month, sig­nal­ing that the la­bor mar­ket con­tin­ues to im­prove de­spite weak­ness in sev­eral other re­cent eco­nomic re­ports," said Daniel Sil­ver, an econ­o­mist at JPMor­gan in New York.

The la­bor mar­ket's re­silience was re­in­forced by an­other re­port from global out­place­ment con­sul­tancy Chal­lenger, Gray & Christ­mas Inc show­ing an­nounced lay­offs by U.S. com­pa­nies tum­bled 18 per­cent to 61,599 in Fe­bru­ary.

In a sep­a­rate re­port, the In­sti­tute for Sup­ply Man­age­ment said its in­dex of ser­vices in­dus­tries em­ploy­ment fell 2.4 per­cent­age points to a read­ing of 49.7 per­cent, drop­ping below the 50 thresh­old for the first since Fe­bru­ary 2014.

That con­trib­uted to the ISM's non­man­u­fac­tur­ing in­dex dip­ping 0.1 per­cent­age point to a read­ing of 53.4 last month. A read­ing above 50 in­di­cates ex­pan­sion in the U.S. ser­vices sec­tor, which ac­counts for more than two-thirds of the econ­omy.

While the weak em­ploy­ment read­ing poses a risk to Fri­day's jobs re­port for Fe­bru­ary, an­other sur­vey from data firm Markit showed ser­vices in­dus­try em­ploy­ment held firm in Fe­bru­ary, though its over­all ser­vices sec­tor in­dex fell to a near two-and-half year low, in part be­cause of a bliz­zard that slammed the North­east.

A re­port on Wed­nes­day showed strong pri­vate sec­tor hir­ing last month. Ac­cord­ing to a Reuters sur­vey of econ­o­mists, non­farm pay­rolls likely in­creased by 190,000 jobs last month af­ter ris­ing 151,000 in Jan­uary. The un­em­ploy­ment rate is seen steady at an eight-year low of 4.9 per­cent.

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