US jobless claims unexpectedly fall; worker productivity drops

WASHINGTON: The number of Americans filing for unemployment benefits unexpectedly fell last week, pointing to a tightening labour market and strengthening economy at the start of the year.

Other data on Thursday showed worker productivity slipped in the fourth quarter for the first time since early 2016.

Weak productivity underscores the challenges of sustaining strong economic growth.

Initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 230,000 for the week ended Jan 27, the Labor Department said on Thursday.

Economists polled by Reuters had forecast claims rising to 238,000 in the latest week.

Last week marked the 152nd straight week that claims remained below the 300,000 threshold, which is associated with a strong labour market.

That is the longest such stretch since 1970, when the labour market was much smaller.

The labour market is near full employment, with the jobless rate at a 17-year low of 4.1 per cent.

Tightening labour market conditions have raised optimism among Federal Reserve officials that inflation will increase towards the US central bank’s 2 per cent target this year.

The Fed on Wednesday left its benchmark overnight interest rate unchanged and described the job market as having “continued to strengthen.”

US financial markets expect a rate increase in March. The Fed has forecast three rate increases for this year after lifting borrowing costs three times in 2017.

US stock index futures extended losses after Thursday’s data. Prices of US Treasuries were trading lower and the dollar was weaker against a basket of currencies.

Last week, the four-week moving average of initial claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 5,000 to 234,500, the lowest level since early November.

The claims data has no bearing on January’s employment report, which is scheduled to be released on Friday, as it falls outside the survey period.

According to a Reuters survey of economists, nonfarm payrolls probably rose by 180,000 jobs in January after increasing by 148,000 in December.

In a second report on Thursday, the Labor Department said nonfarm productivity, which measures hourly output per worker, fell at a 0.1 per cent annualized rate in the fourth quarter.

That was the first drop and weakest performance since the first quarter of 2016. —