US weekly jobless claims fall; Q4 GDP growth revised slightly higher

Washington

THE number of Americans filing new claims for unemployment benefits fell slightly more than expected last week, indicating that the labour market recovery was gaining traction.

Initial claims for state unemployment benefits decreased 17,000 to a seasonally adjusted 232,000 for the week ended Feb 19, the Labor Department said on Thursday (Feb 24). Economists polled by Reuters had forecast 235,000 applications for the latest week.

Claims had risen in the week ended Feb 12, which economists blamed on week-to-week volatility in the data and the delayed impact of winter storms early in the month. With a near record 10.9 million job openings at the end of December, layoffs are minimal and economists expect claims to fall back below 200,000 in the coming weeks. They were last below this level in early December.

Many Federal Reserve officials view labour market conditions as being already at or very close to maximum employment.

Claims have dropped from a record high of 6.149 million in early April 2020. The tightening labour market conditions are boosting wage growth, which is contributing to high inflation.

Rising wages and better job security should, however, help to underpin consumer spending and sustain the economic expansion even as the Fed starts raising interest rates to tamp down inflation, and government money to households and businesses dries up. The US central bank is expected to start raising rates in March, with economists anticipating as many as 7 hikes this year.

A separate report from the Commerce Department on Thursday confirmed that economic growth accelerated in the fourth quarter as the drag from a resurgence in Covid-19 infections over the summer, driven by the Delta variant, eased.

Gross domestic product (GDP) increased at a 7.0 per cent annualised rate last quarter, the government said in its second GDP estimate. That was slightly up from the previously reported 6.9 per cent pace. The economy grew at a 2.3 per cent growth pace in the third quarter. The economic momentum, however, appeared to have faded by December amid a strong headwind from coronavirus infections fuelled by the Omicron variant. But activity has since picked up as the winter wave of infections subsided.

Retail sales surged in January and business activity rebounded in February, data showed this month. That has created an upside risk to GDP growth estimates for the first-quarter, which are mostly below a 2.0 rate. REUTERS