The number of Americans filing for unemployment benefits unexpectedly rose last week, but a sharp drop in layoffs in March suggested the labor market momentum remained intact.
Labor market strength, however, has not been accompanied by robust wage growth, making it unlikely the Federal Reserve will raise interest rates soon. The U.S. central bank is also keeping a cautious eye on international developments.
Initial claims for state unemployment benefits increased 11,000 to a seasonally adjusted 276,000 for the week ended March 26, the Labor Department said on Thursday. Economists had forecast claims remaining unchanged at 265,000 in the latest week.
“Claims remain at a level that is consistent with low rates of involuntary job separation and this report, similar to other labor market-related releases for March, points to no significant shift in labor market trends at the end of the first quarter,” said John Ryding, chief economist at RDQ Economics in New York.
Applications for unemployment benefits have now been below 300,000, a threshold associated with healthy labor market conditions, for 55 weeks, the longest stretch since 1973. With the labor market continuing to tighten, there is probably little scope for significant further declines in claims.
The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 3,500 to 263,250 last week.
In a separate report, global outplacement consultancy Challenger, Gray & Christmas said U.S.-based employers announced 48,207 jobs cuts this month, down 21.7 percent from February.
“Job cuts have slowed since surging in the first two months of the year,” said John Challenger, chief executive officer of Challenger, Gray & Christmas.
U.S. Treasury prices edged up after the data, while the dollar fell against a basket of currencies. U.S. stocks were little changed.
The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade.
Fed Chair Janet Yellen said on Tuesday slowing global growth and lower oil prices posed a downside risk to the domestic economic outlook, adding that she considered it appropriate for policymakers to “proceed cautiously in adjusting policy.”
The claims data has no bearing on Friday’s employment report for March, as it falls outside the survey period. Claims were low last month, suggesting job growth remained solid.
According to a Reuters survey of economists, nonfarm payrolls probably increased by 205,000 this month after rising by 242,000 in February. The unemployment rate is forecast unchanged at an eight-year low of 4.9 percent.
The jobs market also got a boost from a third report from the Institute for Supply Management-Chicago, showing factory employment in the Midwest region jumped to a near one-year high in March.
The ISM-Chicago’s regional manufacturing index surged 6 points to a reading of 53.6 this month also as production, new orders and order backlogs increased.
A reading above 50 indicates expansion in the region’s factory activity. The strong increase in the ISM-Chicago index was the latest indication that the worst of the manufacturing rout was probably over.
“The boost to new orders signals growth will continue in the coming months. The bottom in manufacturing may be behind us,” said Jay Morelock, an economist at FTN Financial in New York.
Manufacturing, which accounts for about 12 percent of the U.S. economy, has been hammered by a robust dollar, spending cuts in the energy sector as lower oil prices undercut profits, and weak global demand. Efforts by businesses to reduce an inventory overhang have also been a drag.