The number of Americans filing for unemployment benefits unexpectedly rose last week, but the underlying trend continued to point to a strengthening labor market.
The labor market optimism was, however, dimmed somewhat by a survey on Thursday showing employment in the services industries fell in February for the first time in two years, even as the overall sector continued to expand.
But economists cautioned against reading too much into the drop, noting that past declines had not translated into overall labor market weakness.
“At first glance that is a concern … but we’ve seen this happen with the employment index before. There are also no other signs that service sector hiring is slowing,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.
Initial claims for state unemployment benefits increased 6,000 to a seasonally adjusted 278,000 for the week ended Feb.27, the Labor Department said. Economists had forecast claims slipping to 271,000 in the latest week.
Claims have now been below the 300,000 threshold, which is associated with healthy labor market conditions, for a year. That is the longest period since the early 1970s. The four-week moving average of claims, seen as a bettermeasure of labor market trends, fell to the lowest level since late November – indicating no stress in the jobs market despite financial market conditions having tightened after fears of recession sparked a global stock market sell-off.
“Through some of the ups and downs in the weekly series, it looks like the trend in initial claims has improved over the past month, signaling that the labor market continues to improve despite weakness in several other recent economic reports,” said Daniel Silver, an economist at JPMorgan in New York.
The labor market’s resilience was reinforced by another report from global outplacement consultancy Challenger, Gray & Christmas Inc showing announced layoffs by U.S. companies tumbled 18 percent to 61,599 in February.
In a separate report, the Institute for Supply Management said its index of services industries employment fell 2.4 percentage points to a reading of 49.7 percent, dropping below the 50 threshold for the first since February 2014.