The number of Americans filing for unemployment benefits fell to near a 44-year low last week, pointing to further tightening of the labor market even as economic growth appears to have remained moderate in the first quarter.
The stronger labor market and rising inflation could push the Federal Reserve to raise interest rates this month. Several Fed officials have in recent days suggested the US central bank could increase borrowing costs soon, Reuters reported.
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 Labor Department said on Thursday.
It was the 104th straight week that claims remained below 300,000, a threshold associated with a healthy labor market. That is the longest stretch since 1970, when the labor market was much smaller. It is now at or close to full employment, with an unemployment rate of 4.8%.
Economists had forecast new claims for unemployment benefits dipping to 243,000 in the latest week. The government reported on Wednesday that the personal consumption expenditures (PCE) price index jumped 1.9% in the 12 months through January, the biggest gain since October 2012. The PCE price index increased 1.6% in December.
Labor Shortages
The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 6,250 to 234,250 last week, the lowest reading since April 1973.
A survey from the Fed on Wednesday showed the labor market remained tight in early 2017, with some of the central bank’s districts reporting “widening” labor shortages.
The labor market strength comes despite signs the economy struggled to gain momentum early in the first quarter after slowing in the final three months of 2016. Data this week showed tepid growth in consumer spending in January, weak equipment and construction spending, and a wider goods trade deficit.
The Atlanta Fed is forecasting first-quarter gross domestic product rising at a 1.8% annualized rate. The economy grew at a 1.9% 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.
