WASHINGTON (Reuters) — The number of Americans filing new claims for unemployment benefits dropped for a third straight week the week of March 4, the latest indication the labor market recovery was gaining traction.
Other data showed a spike in the cost of gasoline pushed up producer prices last month, but the lack of broad price pressures gives the Federal Reserve scope to maintain its very accommodative monetary policy stance even as the job market strengthens.
Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 332,000, the U.S Labor Department said. Economists polled by Reuters had expected first-time applications for jobless aid to rise to 350,000.
The four-week moving average for new claims, a better measure of labour market trends, fell 2,750 to 346,750, the lowest level in five years — suggesting a firming in underlying labour market conditions.
The report follows news last week that non-farm payrolls increased 236,000 in February, with the unemployment rate falling to a four-year low of 7.7 per cent.
"This report reinforced the message we got from last Friday's payroll report. There is a speed-up in the economy. The economy is healing," said Pierre Ellis, senior global economist at Decision Economics in New York.
U.S. stock index futures rose after the data, along with yields on U.S. government debt. The dollar extended gains against the yen and the euro.
In a second report, the Labor Department said its seasonally adjusted Producer Price Index increased 0.7 per cent last month after advancing 0.2 per cent in January.
In the 12 months through February, prices received by farms, factories and refineries were up 1.7 per cent, the fastest rise since October and followed a 1.4 per cent gain the prior month.
However, underlying inflation pressures remained contained, with wholesale prices excluding volatile food and energy costs rising 0.2 per cent after a similar advance in January.
In the 12 months through February, core PPI was up 1.7 per cent, the smallest rise since January 2011. It had increased 1.8 per cent in January.
While gasoline prices pushed up overall PPI last month, they have started to decline from their lofty levels, which should keep inflation pressures benign and boost consumers' purchasing power.
The steady job gains are helping to prop up wages, supporting domestic demand. Though layoffs have ebbed, sluggish domestic demand has made companies cautious about ramping up hiring.
A government report on March 12 showed layoffs in January were the fewest since 2000. The signs of strength in the labour market could intensify the debate at the Fed on the future course of monetary policy.
Despite the improvement in the jobs market, economists do not expect a shift in policy anytime soon.
"The Fed will not exit until they are sure the economy is on a sustained path. This is not going to tip their thinking about stimulus because these things could peter out like what we saw (in the) last couple of years," said Ellis.
Policymakers meet next week to assess economic conditions.
Concerns over high unemployment prompted the U.S. central bank last year to launch an open-ended bond buying program, but divisions are emerging among policymakers about the program.
The central bank is buying $85 billion in bonds per month and has said it would keep up its asset purchases until it sees a substantial improvement in the labor market outlook.
It hopes the purchases will drive down borrowing costs to spur faster economic growth.
The number of people still receiving benefits under regular state programs after an initial week of aid dropped 89,000 to 3.02 million in the week ended March 2. These so-called continuing claims were at their lowest level since June 2008.
© Copyright Canadian HR Reporter, HAB Press. All rights reserved.