Unemployment rates fall, but certain sectors still struggle - Metro US

Unemployment rates fall, but certain sectors still struggle


WASHINGTON – The number of Americans filing for unemployment benefits unexpectedly fell last week, pointing to labor market strength that keeps Federal Reserve interest rate hikes on the table this year.

Other data on Thursday showed factory activity in the mid-Atlantic region contracting at a slower pace in February and hinted at a pick-up in wage growth. But the signs of stabilization in the struggling manufacturing sector were tempered by further declines in new orders and employment.

“The economy is better than the markets think. We wouldn’t rule out another rate hike at the March meeting as financial market turbulence fades away and the economic outlook remains positive,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

Economists had forecast claims rising to 275,000 in the latest week. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 8,000 to 273,250 last week.

RELATED:Brooklyn’s hot new trend: robots

In a second report, the Philadelphia Federal Reserve said its business activity index increased to a reading of -2.8 this month from -3.5 in January. The index has been now been negative for six consecutive months.

The reports had little impact on U.S. stocks, which slipped after Walmart reported a drop in quarterly earnings and cut its full-year forecast. The dollar <.DXY> was little changed against a basket of currencies. Prices for U.S. Treasuries rose.

The health of the job market could determine whether the Fed raises rates this year. The U.S. central bank increased its benchmark overnight interest rate in December, the first hike in nearly a decade.

Bets for a March rate increase have largely been eliminated against the backdrop of tightening financial market conditions and worries about the U.S. and global economies.

RELATED:Paid family leave legislation gaining momentum in New York

St. Louis Fed President James Bullard, a voting member of the Fed’s policy-setting committee this year, said on Wednesday it would be “unwise” to continue raising rates, given the recent stock market turmoil and falling inflation expectations.


Claims are being closely monitored for signs of a pick-up in layoffs in the wake of the recent massive stock market sell-off. There is no indication so far that companies have responded to the tighter financial market conditions by reducing headcount.

Claims have now been below the 300,000 threshold, which is associated with a strong labor market, for 50 straight weeks – the longest stretch since the early 1970s. The claims data covered the survey period for February’s nonfarm payrolls.

The four-week average of claims declined by 12,000 between the January and February survey periods, suggesting an acceleration in job growth. Nonfarm payrolls rose by 151,000 in January. Economists said the drop in claims during the survey was consistent with job gains of about 200,000 in February.

“With anxiety around the state of the global economy already elevated and mixed readings across a number of domestic economic indicators, the recent decline in jobless claims is a welcome development,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.

A third report showed the Conference Board’s leading economic index fell in January for a second straight month because of the stock market volatility.

The economy is being buffeted by a strong dollar and weak global demand, which have undercut manufacturing. Sharp spending cuts by energy firms in response to lower oil prices, and business efforts to sell off inventory have also hurt growth.

The Philadelphia Fed survey showed factories in eastern Pennsylvania, southern New Jersey and Delaware continued to report shrinking orders and inventories this month. While shipments grew, the pace slowed significantly from January and delivery times were even shorter than in the prior month.

Though factories reported a decline in employment and hours worked, firms expected employee compensation – wages and benefits – to rise by 3 percent over the next four quarters.

“These numbers would back up the Fed’s claim of labor shortages driving up labor costs and shrinking margins. We will see, considering most in the survey also expect to cut employee hours and not add workers,” said Steve Blitz, chief economist at ITG Investment Research in New York.

More from our Sister Sites