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US jobless claims rise modestly as labour market tightens
[WASHINGTON] The number of Americans filing for unemployment benefits increased less than expected last week, suggesting the labour market continued to tighten after recent hurricane-related disruptions.
Other reports on Thursday, however, offered a less favourable look at the economy. The goods trade deficit widened in September and retail inventories fell, prompting the Atlanta Federal Reserve to trim its third-quarter GDP growth estimate. In addition, signed contracts to buy previously-owned homes were unchanged last month.
"Firms remain unwilling to release labour. The labour market is very tight," said John Ryding, chief economist at RDQ Economics in New York.
Initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 233,000 for the week ended Oct 21, the Labor Department said. Claims fell to 223,000 in the prior week, which was the lowest level since March 1973.
Economists had forecast claims rising to 235,000 in the latest week. They have declined from the almost three-year high of 298,000 hit at the start of September in the aftermath of Hurricanes Harvey and Irma, which ravaged parts of Texas and Florida.
The impact of Harvey and Irma has largely dropped out of the claims data for the mainland United States. But Irma and Hurricane Maria continue to impact claims for the Virgin Islands and Puerto Rico, now virtually isolated because of the destruction of infrastructure due to the storms.
A Labor Department official said claims data for the islands had continued to be estimated.
Last week marked the 138th straight week that claims remained below the 300,000 threshold, which is associated with a strong labour market. That is the longest such stretch since 1970, when the labour market was smaller.
The labour market is near full employment, with the jobless rate at more than a 16-1/2-year low of 4.2 per cent.
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 9,000 to 239,500 last week.
That suggests a sharp rebound in job growth in October after nonfarm payrolls dropped by 33,000 jobs in September.
LABOUR MARKET SLACK DIMINISHING
The claims report also showed the number of people still receiving benefits after an initial week of aid declined 3,000 to 1.90 million in the week ended Oct 14, the lowest level since December 1973.
The four-week moving average of the so-called continuing claims fell 4,500 to 1.90 million, the lowest reading since January 1974. The continuing claims data covered the week of the household survey from which October's unemployment rate will be derived.
The four-week average of continuing claims fell 40,500 between the September and October survey weeks, suggesting a further improvement in the unemployment rate as labour market slack continues to diminish. The job market strength supports the view that the Federal Reserve will raise interest rates in December.
US financial markets were little moved by the data as investors digested the European Central Bank's announcement that it would extend its bond purchases at a reduced rate. The US dollar rose against a basket of currencies, while prices for US Treasuries were largely unchanged. Stocks on Wall Street rose.
In a separate report on Thursday, the Commerce Department said the goods trade deficit rose 1.3 per cent to US$64.1 billion in September. Exports of goods increased US$0.9 billion to US$129.6 billion. Goods imports gained US$1.7 billion to US$193.7 billion amid a surge in capital and consumer goods imports, which likely reflects the economy's underlying strength.
The Commerce Department also said wholesale inventories increased 0.3 per cent last month. But stocks of goods at retailers tumbled one per cent, weighed down by a 2.6 per cent dive in motor vehicle inventories.
As a result, the Atlanta Fed lowered its third-quarter gross domestic product estimate two-tenths of a percentage point to a 2.5 per cent annualised rate.
"The higher-than-expected trade deficit implies a lower contribution from the net exports," said Michael Gapen, chief economist at Barclays in New York.
"In addition, today's weak inventories data also imply a lower contribution from this subcomponent."
The government will publish it's advance estimate of third-quarter GDP on Friday. The economy grew at a 3.1 per cent pace in the April-June quarter.
A fourth report from the National Association of Realtors showed its pending home sale index was unchanged at more than a 2-1/2-year low in September. The index, which is based on signed home purchase contracts, fell 3.5 per cent on an annual basis.