US weekly jobless claims fall; productivity improves

The number of Americans filing applications for unemployment benefits unexpectedly fell last week, pointing to strong labour market conditions despite signs that job growth was slowing. While other data yesterday showed an improvement in worker productivity in the fourth quarter, the trend remained sluggish. Labour costs continued to rise at a moderate pace in the last quarter, suggesting benign inflation pressures that support the Federal Reserve’s “patient” stance towards further interest rate increases this year. Initial claims for state unemployment benefits slipped 3,000 to a seasonally adjusted 223,000 for the week ended March 2, the Labour Department said.

A job seeker

A job seeker (right) speaks with a representative at a resource fair, hosted by the New Hampshire Employment Security, in Belmont. Labour costs continued to rise at a moderate pace in the last quarter, suggesting benign inflation pressures that support the Federal Reserve’s “patient” stance towards further interest rate increases this year.

Economists polled by Reuters had forecast claims would be unchanged at 225,000 in the latest week. The four-week moving average of initial claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 3,000 to 226,250 last week, the lowest level in a month. The claims data has no bearing on February’s employment report, which is scheduled for release on Friday, as it falls outside the survey period. There are indications that employment growth is slowing after last year’s robust gains.Part of the moderation in job growth is because of a shortage of workers.Recent Institute for Supply Management surveys showed measures of manufacturing and services sectors employment dropping in February. 

A report from the Fed on Wednesday showed “modest-to-moderate gains” in employment in a majority of the US central bank’s districts in February.The Fed’s “Beige Book” report of anecdotal information on business activity collected from contacts nationwide showed notable worker shortages in information technology, manufacturing and construction industries as well as trucking businesses and at restaurants.The Fed said contacts reported labour shortages were restricting employment growth in some areas.The pace of job growth, however, remains more than enough to keep pushing the unemployment rate down.According to a Reuters survey of economists, nonfarm payrolls likely increased by 180,000 jobs in February after surging by 304,000 in January.

The unemployment rate is forecast to fall one-tenth of a percentage point to 3.9% in February. The US dollar extended gains after the release of the data yesterday while US stock index futures were little changed. Prices of US Treasuries were trading higher. In another report yesterday, the Labour Department said nonfarm productivity, which measures hourly output per worker, increased at a 1.9% annualised rate in the last quarter. But data for the third quarter was revised down to show productivity rising at a pace of 1.8% instead of the previously reported 2.2% rate. Economists polled by Reuters had forecast fourth-quarter productivity advancing at a 1.6% rate, following a moderation in gross domestic product growth for that period.The economy grew at a 2.6% rate in the October-December period after a robust 3.4% growth pace in the third quarter.

The release of the full fourth-quarter productivity report was delayed by a 35-day partial shutdown of the US government that ended on Jan 25. The lapse in funding affected the collection and processing of economic data by the Commerce Department. Compared to the fourth quarter of 2017, productivity increased at a rate of 1.8%. Productivity grew 1.3% in 2018, the strongest since 2010, after rising 1.1% in 2017. Tepid productivity is one of the constraints to keeping the economy on a path of strong growth on a sustained basis. Unit labour costs, the price of labour per single unit of output, rose at a 2.0% pace in the fourth quarter. Unit labour costs in the July-September period grew at a 1.6% rate. Labour costs increased at a 1.0% rate compared to the fourth quarter of 2017. They increased 1.4% in 2018, the smallest gain since 2016, after rising 2.2% in 2017.

Sources and photo-credits: Gulf Times, Reuters