U.S. jobless claims unexpectedly falls again but manufacturing sector still struggling
The number of Americans filing for unemployment benefits unexpectedly fell last week, pointing to labor market strength that could keep Federal Reserve interest rate hikes on the table this year.
Other data on Thursday showed factory activity in the mid-Atlantic region contracting at a slower pace in February and hinted at a pick-up in wage growth. But the signs of stabilization in the struggling manufacturing sector were tempered by further declines in new orders and employment.
“The economy is better than the markets think. We wouldn’t rule out another rate hike at the March meeting as financial market turbulence fades away and the economic outlook remains positive,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.
Economists had forecast claims rising to 275,000 in the latest 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 8,000 to 273,250 last week.
In a second report, the Philadelphia Federal Reserve said its business activity index increased to a reading of -2.8 this month from -3.5 in January. The index has been now been negative for six consecutive months.
The reports had little impact on U.S. stocks, which were mixed after Walmart (WMT.N) reported a drop in quarterly earnings and cut its full-year forecast. The dollar .DXY rose against a basket of currencies and hit a two-week high against the euro. Prices for U.S. Treasuries rose.
The health of the job market could determine whether the Fed raises rates this year. The U.S. central bank lifted its benchmark overnight interest rate in December, the first increase in nearly a decade.
Bets for a March rate hike have largely been eliminated against the backdrop of tightening financial market conditions and worries about the U.S. and global economies.
EYE ON LAYOFFS
Claims are being closely monitored for signs of a pick-up in layoffs in the wake of the recent massive stock market sell-off. There is no indication so far that companies have responded to the tighter financial market conditions by reducing headcount.