US labor market tightens as jobless claims fall
WASHINGTON (Reuters) – New applications for US jobless benefits unexpectedly fell last week while producer prices rebounded strongly in April, pointing to a tightening labor market and rising inflation that could spur the Federal Reserve to raise interest rates in June.
Labor market strength was also underscored by a sharp drop in the number of Americans on unemployment rolls to a 28-1/2-year low in the final week of April.
“The best labor market in nearly 30 years should tell Fed officials that additional monetary stimulus is not required. We expect them to put another rate hike notch on their belts at the upcoming June meeting,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.
Initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 236,000 for the week ended May 6, the Labor Department said on Thursday, confounding economists’ expectations for a rise to 245,000.
It was the 114th straight week that claims remained below the 300,000 threshold which is associated with a healthy labor market. That is the longest such stretch since 1970, when the labor market was smaller.
The labor market is close to full employment, with the unemployment rate at a 10-year low of 4.4 percent.
The number of people still receiving benefits after an initial week of aid tumbled 61,000 to 1.92 million in the week ended April 29, the lowest level since November 1988.
Labor market momentum, also marked by a sharp rebound in job growth in April, has left financial markets anticipating further monetary policy tightening from the Fed’s June 13-14 meeting.
Prices for US Treasuries briefly fell on the data, with the yield on the interest rate sensitive two-year note rising to a near two-month high.
Stocks on Wall Street declined as a bigger-than-expected drop in quarterly profit and sales at department store Macy’s hurt consumer discretionary shares. The dollar was little changed against a basket of currencies.
The US central bank increased its benchmark overnight interest rate by 25 basis points in March and has forecast two more rate hikes this year. The economy created 211,000 job in April after adding only 79,000 positions in March.