WASHINGTON (Reuters) – New applications for U.S. jobless benefits increased more than expected last week, but the number of Americans on unemployment rolls fell to its lowest level since 1973, pointing to diminishing labor market slack.
Other data on Thursday showed a pickup in factory activity in the mid-Atlantic region this month, with manufacturers saying they were asking for higher prices for their products.Tightening labor market conditions and firming inflation bolster expectations the Federal Reserve will raise interests rates next month.
Initial claims for state unemployment benefits rose 11,000 to a seasonally adjusted 222,000 for the week ended May 12, the Labor Department said. Claims data for the prior week was unrevised. Economists polled by Reuters had forecast claims rising to 215,000 in the latest week.
The labor market is viewed as being close to or at full employment, with the jobless rate near a 17-1/2-year low of 3.9 percent. The unemployment rate is within striking distance of the Fed’s forecast of 3.8 percent by the end of this year. The U.S. central bank raised rates in March and forecast at least two more hikes for this year.
U.S. Treasury yields were little changed after the data. U.S. stock index futures were trading lower while the dollar was slightly higher against a basket of currencies.The four-week moving average of initial claims, viewed as a better measure of labor market trends as it irons out week-to-week volatility, fell 2,750 to 213,250 last week, the lowest level since December 1969.
The claims data covered the survey period for the nonfarm payrolls portion of May’s employment report.
SHRINKING LABOR MARKET SLACK
The four-week average of claims fell 18,250 between the April and May survey periods, suggesting solid job growth. Nonfarm payrolls increased by 164,000 jobs in April after rising by 135,000 in March. Job gains are slowing as employers struggle to find skilled workers.
There were a record 6.6 million unfilled jobs in March, according to government data published last week.
The claims report also showed the number of people receiving benefits after an initial week of aid declined 87,000 to 1.71 million in the week ended May 5, the lowest level since December 1973. The four-week moving average of the so-called continuing claims dropped 39,750 to 1.77 million, also the lowest level since December 1973.
Declining continuing claims underscore tightening labor market conditions and support economists’ expectations that wage growth will accelerate in the second half of the year.
In a separate report on Thursday, the Philadelphia Fed said its manufacturing business outlook survey’s current general activity index rose about 11 points to a reading of 34.4 in May. Manufacturers in the mid-Atlantic region reported hiring more workers this month. The survey’s employment index rose to a seven-month high.
A measure of prices paid by factories in the region fell, but the survey’s prices received index rose to its highest reading since February 1989.
Reporting by Lucia Mutikani; Editing by Paul Simao