New applications for U.S. jobless benefits rose slightly more than expected last week, but a drop in the number of Americans on unemployment rolls to a 17-year low suggested the labor market continues to tighten.
The labor market’s strength was underscored by other data on Thursday showing manufacturers in the mid-Atlantic region hired more workers this month and increased working hours, even as factory activity slowed from March’s brisk pace.
Initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 244,000 for the week ended April 15, the Labor Department said. The increase followed three straight weeks of declines.
Given that the labor market is near full employment with a 4.5% jobless rate and companies are reporting difficulties finding skilled workers, some economists see limited scope for claims to fall further.
“Layoffs remain low and employers feel no need to aggressively trim their payrolls. As labor market conditions tighten, the pool of available unemployed skilled workers continues to dry up,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.
Claims have now been below 300,000, a threshold associated with a healthy labor market, for 111 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller. Economists had forecast first-time applications for jobless benefits rising to 242,000 last week.
The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 4,250 to 243,000 last week.
Shrinking Unemployed Pool
The number of people still receiving benefits after an initial week of aid decreased 49,000 to 1.98 million in the week ended April 8, the lowest reading since April 2000.
In a separate report, the Philadelphia Federal Reserve said its index of current manufacturing activity fell to a still-high reading of 22.0 this month from 32.8 in March. The index has been positive for nine consecutive months. April’s slowdown was driven by a pullback in the new orders and shipments measures.
Firms reported an increase in manufacturing employment and workweek this month. The current employment index rose 2.4 points to its highest level since May 2011.
There was also a jump in manufacturers reporting intentions to boost capital spending this year. The capital expenditures expectations index rose to its highest level in just over 17 years.
“The continued increase bodes well for continued strength in capex spending in coming months,” said Kevin Cummins, senior U.S. economist at NatWest Markets in Stamford, Connecticut.
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The dollar was trading marginally lower against a basket of currencies, while U.S. stocks rose amid increased optimism around the first-quarter earnings season. Prices for U.S. Treasuries fell.
The claims data covered the survey week for April nonfarm payrolls. Claims declined 17,000 between the March and April survey periods, suggesting that job growth likely picked up this month. Nonfarm payrolls increased by 98,000 jobs in March, the fewest since May 2016.
An acceleration in employment growth would confirm that March’s moderation was weather-driven and underscore the economy’s strong fundamentals despite signs that growth slowed to well below a 1.0% annualized rate in the first quarter.
“The claims data support our view that temporary factors, mainly the weather restrained job growth in March and that we should see stronger results in the April data,” said Daniel Silver, an economist at JPMorgan in New York.