The number of Americans filing applications for unemployment benefits dropped from near a 1-1/2-year high last week, but the decline was less than expected, suggesting some moderation in the pace of job growth. Still, the Labour Department's report on Thursday continued to point to strong job market conditions, which should underpin the economy amid rising headwinds, including a fading fiscal stimulus boost and a trade war between Washington and Beijing, as well as slowing growth in China and Europe.
The Federal Reserve last week kept interest rates steady but said it would be patient in lifting borrowing costs further this year in a nod to growing uncertainty over the economy's outlook. The US central bank removed language from its December policy statement that risks to the outlook were "roughly balanced."
"Labour market conditions remain quite positive, good news for workers, for the consumer sector and the economy more broadly," said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.
Initial claims for state unemployment benefits tumbled 19,000 to a seasonally adjusted 234,000 for the week ended Feb. 2, the Labour Department said on Thursday. The drop partially unwound the prior week's jump, which lifted claims to 253,000, the highest reading since September 2017.
Claims that week were boosted by layoffs in the service industry in California, most likely striking teachers in Los Angeles.
A 35-day partial shutdown of the federal government as well as difficulties adjusting the data around moving holidays like Martin Luther King Jr. day, which occurred later this year than in recent years, also probably contributed to the spike in filings. The longest shutdown in history likely forced workers employed by government contractors to file claims for unemployment benefits.
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