US labour market tightening; inflation pressures moderate

[WASHINGTON] The number of Americans filing applications for unemployment benefits dropped to a 49-1/2-year low last week, pointing to sustained labour market strength that could temper expectations of a sharp slowdown in economic growth.

Other data on Thursday showed producer prices increased by the most in five months in March amid a surge in the cost of gasoline. But underlying producer prices remained soft, the latest indication of tame inflation pressures that strengthen the Federal Reserve's decision to suspend further interest rate increases this year despite tight labour market conditions.

Initial claims for state unemployment benefits fell 8,000 to a seasonally adjusted 196,000 for the week ended April 6, the lowest level since early October 1969, the Labour Department said. Claims have now declined for four straight weeks.

Economists polled by Reuters had forecast claims would rise to 211,000 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 7,000 to 207,000 last week, the lowest level since early December 1969.

The labour market is the main pillar of support for the economy, which appears to have lost momentum in the first quarter as the stimulus from a US$1.5 trillion tax cut package fades and a trade war between China and the United States and softening global demand hurt exports.

Nonfarm payrolls increased by 196,000 jobs in March, well above the roughly 100,000 needed per month to keep up with growth in the working-age population. The unemployment rate is at 3.8 per cent, close to the 3.7 per cent Federal Reserve officials project it will be by the end of the year.

In a second report on Thursday, the Labour Department said its producer price index for final demand rose 0.6 per cent in March, the largest increase since last October. The PPI edged up 0.1 per cent in February.

In the 12 months through March, the PPI rose 2.2 per cent after advancing 1.9 per cent in the 12 months through February. Economists polled by Reuters had forecast the PPI would climb 0.3 percent in March and increase 1.9 per cent on a year-on-year basis.

A key gauge of underlying producer price pressures that excludes food, energy and trade services was unchanged last month after ticking up 0.1 per cent in February. The so-called core PPI increased 2.0 per cent in the 12 months through March. That was the smallest annual increase since August 2017 and followed a 2.3 per cent rise in February.

REUTERS