The number of Americans filing for unemployment benefits rose from a five-month low last week, but remained below a level associated with a strengthening labour market as the economy regains momentum after a slow fourth quarter.
Other data on Thursday showed factory activity in the mid-Atlantic region expanded in March for the first time in seven months, the latest sign of stability in the distressed manufacturing sector. In addition, job openings hit a six-month high in January and a gauge of future economic activity increased in February after two straight months of declines.
The data should further allay fears of a looming recession and could keep the Federal Reserve on course to gradually raise interest rates this year. The US central bank held borrowing costs steady on Wednesday.
"The labour market is tight as a drum. If we continue to receive strong reports like this, then the Fed is going to have to put a June rate hike on the table," said Chris Rupkey, chief economist at MUFG Union Bank in New York.
Initial claims for state unemployment benefits increased 7,000 to a seasonally adjusted 265,000 for the week ended March 12, the Labour Department said. Claims have now been below 300,000, a threshold associated with healthy labour market conditions, for 54 weeks, the longest stretch since 1973.
The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, edged up 750 to 268,000 last week.
The claims data covered the survey period for March nonfarm payrolls. The four-week average of claims fell 5,250 between the February and March survey periods, suggesting further payrolls gains. The labour market added 242,000 jobs in February.
The labour market's resilience was underscored by a second report from the Labour Department showing job openings increased by 260,000 to a six-month high of 5.5 million in January. While hiring fell in January, that was likely because employers are having trouble finding qualified workers for open positions.
Fed Chair Janet Yellen told reporters on Wednesday that "the labour market continues to strengthen" and that economic growth appeared to have picked up from the fourth quarter's "modest" pace. The economy grew at a 1.0 percent annualised rate in the final three months of 2015 and first-quarter gross domestic product growth estimates are around a 2 percent rate.
New projections from Fed officials showed they expected two quarter-point rate increases by the end of this year, half the number seen in December.
In a third report, the Federal Reserve Bank of Philadelphia said its index for manufacturing in the mid-Atlantic region jumped to 12.4 this month, the first positive reading in seven months, from a reading of -2.8 in February.
The survey's gauge of new orders surged 21 points to 15.7, with almost 37 percent of firms reporting an increase in new orders this month. The shipments index jumped 20 points to 22.1 and unfilled orders and delivery times also improved.
In addition, factories continued to report declining inventories, which bodes well for future production. But factory employment in the region remained weak.
The Philadelphia Fed survey added to a similar survey from the New York Fed and Wednesday's manufacturing production report for February in suggesting the slump in factory activity had probably run its course.
Manufacturing, which accounts for 12 percent of the US economy, has been slammed by dollar strength, lower oil prices and efforts by businesses to reduce an inventory overhang.
"The improvement supports our view that we are moving past the weakest period for the manufacturing sector. It is likely that we are now past the biggest drags from the stronger dollar and inventory correction," said Daniel Silver, an economist at JPMorgan in New York.
A fourth report from the Commerce Department showed the current account deficit, which measures the flow of goods, services and investments into and out of the country, fell 3.6 percent to $125.3 billion in the fourth quarter.
The improvement, however, is unlikely to be sustained as the strong dollar continues to undercut exports of goods.
For 2015, the current account deficit totalled $484.1 billion, the largest since 2008. The fourth-quarter current account deficit represented 2.8 percent of gross domestic product, down from 2.9 percent in the July-September quarter.
"The outsized surge in the dollar and weakness in emerging market economies has prompted a pull-back in exports that has more than offset improvement in the petroleum balance," said Michael Englund, chief economist at Action Economics in Boulder, Colorado.