US jobless claims near 44-year low as labour market tightens

Moderate economic growth keeps claims below 300,000 for 104th straight week as Fed rate rise seen imminent

PUBLISHED : Thursday, 02 March, 2017, 11:00pm
UPDATED : Thursday, 02 March, 2017, 11:00pm

The number of Americans filing for unemployment benefits fell to near a 44-year low last week, pointing to further tightening of the labour market even as economic growth appears to have remained moderate in the first quarter.

The stronger labour market combined with rising inflation could push the Federal Reserve to raise interest rates this month.

Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 223,000 for the week ended February 25, the lowest level since March 1973, the Labour Department said on Thursday. Data for the prior week was revised to show 2,000 fewer applications received than previously reported.

It was the 104th 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. It is now at or close to full employment, with an unemployment rate of 4.8 per cent.

Economists polled by Reuters had forecast new claims for unemployment benefits dipping to 243,000 in the latest week. Financial markets are already pricing in a rate rise at the Fed’s March 14-15 policy meeting.

US stock index futures rose after the data on Thursday. The US dollar also firmed against a basket of currencies, while prices for US government debt fell.

A survey from the US central bank on Wednesday showed the labour market remained tight in early 2017, with some of the Fed’s districts reporting “widening” labour shortages.

The government reported on Wednesday that the personal consumption expenditures price index jumped 1.9 per cent in the 12 months through January, the biggest gain since October 2012. The index increased 1.6 per cent in December.

The core personal consumption expenditures price index, the Fed’s preferred inflation measure, increased 1.7 per cent, still below its 2 per cent target.

The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 6,250 to 234,250 last week, the lowest reading since April 1973.

Data this week showed tepid growth in consumer spending in January, weak equipment and construction spending, and a wider goods trade deficit, suggesting the economy struggled to gain momentum early in the first quarter after slowing in the final three months of 2016.

The Atlanta Fed is forecasting first-quarter gross domestic product rising at a 1.8 per cent annualised rate. The economy grew at a 1.9 per cent pace in the fourth quarter.

Thursday’s claims report also showed the number of people still receiving benefits after an initial week of aid increased 3,000 to 2.07 million in the week ended February 18. The four-week average of the so-called continuing claims edged up 750 to 2.07 million.

The continuing claims data covered the survey week for February’s unemployment rate. The four-week moving average of claims fell 21,500 between the January and February survey periods, suggesting an improvement in the jobless rate.