The number of Americans filing for unemployment benefits fell more than expected last week, hitting its lowest level since October, pointing to sustained strength in the labor market that should further dispel fears of a recession. Initial claims for state unemployment benefits declined 18,000 to a seasonally adjusted 259,000 for the week ended March 5, the lowest reading since mid-October, the Labor Department said on Thursday.
“The labor market continues to be the light shining through the foggy state of the global economy … the recent improvement in a host of economic data should provide a bit of relief that the expansion still has legs,” said Jim Baird, chief investment Officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.
Jobless claims are being watched for signs of labor market weakness following a recent massive stock market sell-off that caused a tightening in financial market conditions amid slowing global growth and fears the U.S. economy was heading into recession.
So far, the jobs market remains on strong footing, with nonfarm payrolls increasing by 242,000 jobs in February and the unemployment rate holding at an eight-year low of 4.9 percent.
The recession fears have also been soothed by strong consumer spending at the start of the year, as well as signs of some stabilization in the troubled manufacturing sector.
A tightening labor market and firming inflation could see the Federal Reserve gradually raising interest rates this year. The U.S. central bank hiked its benchmark overnight interest rate in December for the first time in nearly a decade.
“A data dependent Fed should be focused on these developments and see that the most up-to-date, high-frequency measure of economic activity in the U.S. shows no signs of slackening growth in response to market volatility and developments abroad,” said John Ryding, chief economist at RDQ Economics in New York.