Americans Filing for Unemployment Benefits at 45 yr Lows
The number of Americans filing for unemployment benefits unexpectedly fell last week, dropping to its lowest level in almost 45 years as the labor market tightened further, driving expectations of faster wage growth this year.
Initial claims for state unemployment benefits decreased 9,000 to a seasonally adjusted 221,000 for the week ended 3 February, the Labor Department said on Thursday. Claims fell to 216,000 in mid-January, which was the lowest level since January 1973.
Economists polled had forecast claims rising to 232,000 in the latest week.
Last week marked the 153rd straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since Y 1970, when the labor market was much smaller.
The labor market is near full employment, with the jobless rate at a 17-year low of 4.1 percent. The tighter labor market is starting to exert upward pressure on wage growth.
The Labor Department reported last week that average hourly earnings jumped 2.9% Y-Y in January, the largest gain since June 2009, after advancing 2.7% in December.
Strong wage growth supports optimism among Fed officials that inflation will increase toward the US central bank’s 2% target this year.
Fed watchers expect it will raise interest rates 1/4 pt in March.
The Fed has forecast 3 rate increases for this year, but much will depend on the inflation outlook and financial conditions. The central bank lifted borrowing costs 3X in Y 2017.
US financial markets were little moved by the claims data.
The US Labor Department said claims for Maine were estimated last week. It also said claims-taking procedures in Puerto Rico and the Virgin Islands had still not returned to normal months after the territories were slammed by Hurricanes Irma and Maria.
Last week, the four-week moving average of initial claims, considered a better measure of labor market trends as it irons out W-W volatility, declined 10,000 to 224,500, the lowest level since March 1973.
The claims report also showed the number of people receiving benefits after an initial week of aid fell 33,000 to 1.92-M in the week ended 27 January. The 4-week MA of continuing claims rose 12,500 to 1.95-M.