US job market tightening; factory sector healing

WASHINGTON—The number of Americans filing for unemployment benefits rose from a five-month low last week, but remained below a level associated with a strengthening labor market as the economy regains momentum after a slow fourth quarter.

Other data on Thursday showed factory activity in the mid-Atlantic region expanded in March for the first time in seven months, the latest sign of stability in the distressed manufacturing sector.

In addition, job openings hit a six-month high in January and a gauge of future economic activity increased in February after two straight months of declines.

The data should further allay fears of a looming recession and could keep the Federal Reserve on course to gradually raise interest rates this year. The US central bank held borrowing costs steady on Wednesday.

"The labor market is tight as a drum. If we continue to receive strong reports like this, then the Fed is going to have to put a June rate hike on the table,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

Initial claims for state unemployment benefits increased 7,000 to a seasonally adjusted 265,000 for the week ended March 12, the Labor Department said. Claims have now been below 300,000, a threshold associated with healthy labor market conditions, for 54 weeks, the longest stretch since 1973.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, edged up 750 to 268,000 last week.

The claims data covered the survey period for March nonfarm payrolls. The four-week average of claims fell 5,250 between the February and March survey periods, suggesting further payrolls gains. The labor market added 242,000 jobs in February.

The labor market’s resilience was underscored by a second report from the Labor Department showing job openings increased by 260,000 to a six-month high of 5.5 million in January. While hiring fell in January, that was likely because employers are having trouble finding qualified workers for open positions.

Fed Chair Janet Yellen told reporters on Wednesday that “the labor market continues to strengthen” and that economic growth appeared to have picked up from the fourth quarter’s “modest" pace.

The economy grew at a 1.0 percent annualized rate in the final three months of 2015 and first-quarter gross domestic product growth estimates are around a 2 percent rate.

New projections from Fed officials showed they expected two quarter-point rate increases by the end of this year, half the number seen in December.