The number of Americans filing applications for unemployment benefits unexpectedly fell last week, pointing to strong labor market conditions despite signs that job growth was slowing.
While other data on Thursday showed an improvement in worker productivity in the fourth quarter, the trend remained sluggish. Labor 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 Labor Department said. 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 labor 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 U.S. 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 labor 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 per cent in February.
The U.S. dollar extended gains after the release of the data on Thursday while U.S. stock index futures were little changed. Prices of U.S. Treasuries were trading higher.
MODERATE LABOR COSTS
In another report on Thursday, the Labor Department said nonfarm productivity, which measures hourly output per worker, increased at a 1.9 per cent annualized rate in the last quarter.
But data for the third quarter was revised down to show productivity rising at a pace of 1.8 per cent instead of the previously reported 2.2 per cent rate.
Economists polled by Reuters had forecast fourth-quarter productivity advancing at a 1.6 per cent rate, following a moderation in gross domestic product growth for that period.
The economy grew at a 2.6 per cent rate in the October-December period after a robust 3.4 per cent 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 U.S. 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 per cent. Productivity grew 1.3 per cent in 2018, the strongest since 2010, after rising 1.1 per cent in 2017.
Tepid productivity is one of the constraints to keeping the economy on a path of strong growth on a sustained basis.
Unit labor costs, the price of labor per single unit of output, rose at a 2.0 per cent pace in the fourth quarter.
Unit labor costs in the July-September period grew at a 1.6 per cent rate. Labor costs increased at a 1.0 per cent rate compared to the fourth quarter of 2017. They increased 1.4 per cent in 2018, the smallest gain since 2016, after rising 2.2 per cent in 2017.