Number of Americans filing for jobless benefits tumble to a 43-1/2 year low

PUBLISHED : Friday, 24 February, 2017, 2:15am
UPDATED : Friday, 24 February, 2017, 4:33am

The number of Americans filing for unemployment benefits rose slightly last week but the four-week average of such claims, considered a better gauge, fell to a 43-1/2-year low in a sign of a strengthening labour market.

Other data on Thursday showed house prices increasing solidly in December amid strong demand for housing even as mortgage rates rose. The reports highlighted strength in the economy that could allow the Federal Reserve to raise interest rates in the near-term.

“All indications are that job creation remains solid, underscoring the resiliency of the nearly eight-year economic recovery,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan. “A March (rate) hike cannot be ruled out.”

Initial claims for state unemployment benefits increased 6,000 to a seasonally adjusted 244,000 for the week ended February 18, the Labour Department said. It was the 103rd straight week that claims remained below 300,000, a threshold associated with a healthy labour market.

That is the longest stretch since 1970, when the labour market was much smaller. The labour market is at or close to full employment, with the unemployment rate at 4.8 per cent.

Economists had forecast new claims for unemployment benefits rising to 241,000 in the latest week. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 4,000 to 241,000 last week, the lowest reading since July 1973.

The economy could get a boost from a tax reform being mulled by the Trump administration. Treasury Secretary Steven Mnuchin said on Thursday he wanted to see “very significant” tax reform passed before Congress’ August recess. Mnuchin, however, said the government was still studying the merits of a proposed border tax system.

Hopes of tax cuts have boosted business and consumer confidence in recent months. The dollar was trading lower against a basket of currencies, hitting a two-week low versus the yen. Stocks on Wall Street slipped, while prices for US government debt rose.

US economy leaps higher, setting stage for Fed raising rates

Minutes of the Federal Reserve’s January 31-February 1 monetary policy meeting published on Wednesday showed that many policymakers believed another interest rate hike might be appropriate “fairly soon” if labour market and inflation data meet or beat expectations.

The US central bank raised its benchmark overnight interest rate last December. It has forecast three rate increases this year.

Last week’s claims report covered the survey period for the Labour Department’s nonfarm payrolls data for February. The four-week average of claims fell 6,500 between the January and February payrolls survey weeks. This suggests another month of strong job gains after payrolls increased 227,000 in January.

“The message of this report remains that layoffs rates are extremely subdued,” said John Ryding, chief economist at RDQ Economics in New York. “We view subdued layoffs as a sign of labour market tightness with employers retaining the labour they have amid elevated job openings and a lack of available workers.”

The tightening labour market is helping to underpin demand for housing. In a report on Thursday, the Federal Housing Finance Agency (FHFA) said its house price index rose a seasonally adjusted 6.2 per cent in December from a year ago.

That followed a 6.1 per cent gain in November. The FHFA’s index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac.

The higher home prices largely reflect tight housing inventories against the backdrop of strong demand. This is despite the 30-year fixed mortgage rate rising more than 50 basis points since November to above 4.0 per cent. But with the home price increases outpacing wage growth, economists expect demand for housing to slow this year.

“While appreciation has remained strong lately, we look for some moderation in price increases over time along with some broader cooling in the housing data,” said Daniel Silver, an economist at JPMorgan in New York.