The number of Americans filing for unemployment benefits unexpectedly rose last week, but a sharp drop in layoffs in March suggested the labour market momentum remained intact. Labour market strength, however, has not been accompanied by robust wage growth, making it unlikely the Federal Reserve will raise interest rates soon. The US central bank is also keeping a cautious eye on international developments.
Initial claims for state unemployment benefits increased 11,000 to a seasonally adjusted 276,000 for the week ended March 26, the Labour Department said on Thursday. Economists had forecast claims remaining unchanged at 265,000 in the latest week. "Claims remain at a level that is consistent with low rates of involuntary job separation and this report, similar to other labour market-related releases for March, points to no significant shift in labour market trends at the end of the first quarter," said John Ryding, chief economist at RDQ Economics in New York.
Applications for unemployment benefits have now been below 300,000, a threshold associated with healthy labour market conditions, for 56 weeks, the longest stretch since 1973. With the labour market continuing to tighten, there is probably little scope for significant further declines in claims. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, rose 3,500 to 263,250 last week.
In a separate report, global outplacement consultancy Challenger, Gray & Christmas said US-based employers announced 48,207 jobs cuts this month, down 21.7 percent from February. "Job cuts have slowed since surging in the first two months of the year," said John Challenger, chief executive officer of Challenger, Gray & Christmas. US Treasury prices rose, while the dollar fell against a basket of currencies. US stocks were trading higher.
The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade. Fed Chair Janet Yellen said on Tuesday slowing global growth and lower oil prices posed a downside risk to the domestic economic outlook, adding that she considered it appropriate for policymakers to "proceed cautiously in adjusting policy." The claims data has no bearing on Friday's employment report for March, as it falls outside the survey period. Claims were low last month, suggesting job growth remained solid. According to a Reuters survey of economists, nonfarm payrolls probably increased by 205,000 this month after rising by 242,000 in February. The unemployment rate is forecast unchanged at an eight-year low of 4.9 percent. The jobs market also got a boost from a third report from the Institute for Supply Management-Chicago, showing factory employment in the Midwest region jumped to a near one-year high in March.
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