The number of Americans filing for unemployment benefits unexpectedly fell last week to a two-month low, pointing to labor market strength that could pave the way for the Federal Reserve to raise interest rates by December.
The upbeat initial jobless claims data came a day after the U.S. central bank left interest rates unchanged but strongly signaled it could raise borrowing costs by the end of the year, citing a recent pickup in economic growth and continued progress in the labor market.
While other data on Thursday showed home resales fell in August for a second straight month, realtors and economists blamed the slump on a chronic shortage of houses available on the market, which is limiting choice for buyers.
The housing market remains on solid ground, with home prices rising at a moderate pace.
“The economy is stronger than we thought with another turn tighter of the screw for the labor market. If Fed officials are waiting for the economy to improve further before raising rates, they are just too late,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.
Initial claims for state unemployment benefits declined 8,000 to a seasonally adjusted 252,000 for the week ended Sept. 17, the Labor Department said, the lowest level since mid-July.
It was the 81st consecutive week that claims remained below the 300,000 threshold, which is associated with robust labor market conditions. That is the longest stretch since 1970, when the labor market was much smaller.
Economists had forecast first-time applications for jobless benefits rising to 262,000 in the latest week.
The Fed on Wednesday offered a solid assessment of the labor market, with Fed Chair Janet Yellen saying policymakers continued to expect that labor market conditions “will strengthen somewhat further over time.”
The U.S. central bank raised its benchmark overnight interest rate last December for the first time in nearly a decade. It has held the rate steady so far this year amid concerns over persistently low inflation.
U.S. stocks and government bonds were trading higher on Thursday amid perceptions that the Fed would increase rates slowly because of benign inflation.
The dollar fell against a basket of currencies.