The number of Americans filing for unemployment benefits fell more than expected last week, hitting its lowest level since October, pointing to sustained strength in the labour market that should further dispel fears of a recession.
Initial claims for state unemployment benefits declined 18,000 to a seasonally adjusted 259,000 for the week ended March 5, the lowest reading since mid-October, the Labour Department said yesterday.
“The labour market continues to be the light shining through the foggy state of the global economy ... the recent improvement in a host of economic data should provide a bit of relief that the expansion still has legs,” said Jim Baird, chief investment Officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.
Jobless claims are being watched for signs of labour market weakness following a recent massive stock market sell-off that caused a tightening in financial market conditions amid slowing global growth and fears the US economy was heading into recession.
So far, the jobs market remains on strong footing, with nonfarm payrolls increasing by 242,000 jobs in February and the unemployment rate holding at an eight-year low of 4.9%.
The recession fears have also been soothed by strong consumer spending at the start of the year, as well as signs of some stabilisation in the troubled manufacturing sector.
A tightening labour market and firming inflation could see the Federal Reserve gradually raising interest rates this year. The US central bank hiked its benchmark overnight interest rate in December for the first time in nearly a decade.
“A data dependent Fed should be focused on these developments and see that the most up-to-date, high-frequency measure of economic activity in the US shows no signs of slackening growth in response to market volatility and developments abroad,” said John Ryding, chief economist at RDQ Economics in New York.
The Fed is, however, not expected to raise borrowing costs at its meeting next week.
US stock were little changed after opening higher following the European Central Bank’s decision to lower key interest rates and expand its bond purchase program in an effort to stimulate growth in the euro zone. The dollar weakened against a basket of currencies and US Treasury debt prices fell.
Economists polled by Reuters had forecast claims slipping to 275,000 last week. Claims have now been below the 300,000 threshold, which is associated with healthy labour market conditions, for a year — the longest run since the early 1970s.
The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 2,500 to 267,500 last week, the lowest level since late October.
The claims report showed the number of people still receiving benefits after an initial week of aid dropped 32,000 to 2.23mn in the week ended February 27. The four-week average of the so-called continuing claims fell 4,500 to 2.25mn.
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