US unemployment claims rise to three-month high despite expectations that they would fall
US producer prices also fell for the first time in nearly one-and-a-half years, which could make the Federal Reserve more cautious about raising interest rates this year
US filings for unemployment benefits unexpectedly rose to a three-month high last week despite expectations that they would drop, the Labour Department said on Thursday.
It said initial claims for state unemployment benefits increased 11,000 to a seasonally adjusted 261,000 for the week ended January 6, putting it at the highest level since late September. Economists had forecast claims falling to 245,000.
A large part of the country faced frigid temperatures and snow during the first week of 2018, likely making it hard for some people to report for work. Unadjusted claims for snow-slammed New York rose by 27,170 last week, more than half of the national total.
Claims have risen since mid-December, though the data tend to be volatile during year-end holidays.
However, last week marked the 149th 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.
Last week, the four-week moving average of initial claims rose 9,000 to 250,750. That is considered a better measure of labour market trends, as it irons out week-to-week volatility.
The continuing low level of claims suggests a strong labour market, but the pace of job growth is expected to slow this year.
That’s because the labour market is near full employment, with the jobless rate at a 17-year low of 4.1 per cent.
Non-farm payrolls increased by 148,000 jobs in December after surging by 252,000 jobs in November.
At the same time, further increases in jobless claims could suggest that labour-market progress is hitting bumps.
A report last week showed that US employers added fewer jobs in December than economists had pencilled in, amid a drop in retail positions.
Separately, US producer prices fell for the first time in nearly one-and-a-half years in December amid declining costs for services, which could temper expectations that inflation will accelerate in 2018.
Weak inflation at the producer level could add to concerns that the factors restraining inflation could become more persistent and result in the Federal Reserve being more cautious about raising interest rates this year.
The Labour Department said on Thursday its producer price index for final demand slipped 0.1 per cent last month. That was the first drop in the PPI since August 2016 and followed two straight monthly increases of 0.4 per cent.
In the 12 months through December, the PPI rose 2.6 per cent after accelerating 3.1 per cent in November.
A key gauge of underlying producer price pressures that excludes food, energy and trade services edged up 0.1 per cent last month.
The so-called core PPI increased 0.4 per cent in November. It rose 2.3 per cent in the 12 months through December. The core PPI was up 2.4 per cent in the 12 months through November.
The Fed raised interest rates three times in 2017. Its forecast of three rate hikes for this year will depend on the inflation outlook.