US jobless claims near 44-1/2-year low; productivity accelerates
FILE PHOTO: A help wanted sign is posted at a taco stand in Solana Beach, California, U.S., July 17, 2017.
WASHINGTON: The number of Americans filing for unemployment benefits fell to a near 44-1/2-year low last week, supporting expectations of a sharp rebound in job growth in October after employment was depressed by hurricane-related disruptions in September.Other data on Thursday showed worker productivity increased at its fastest pace in three years in the third quarter. A tightening labor market and improving productivity likely strengthen the case for the Federal Reserve raising interest rates in December, despite wage pressures remaining tame.Initial claims for state unemployment benefits decreased 5,000 to a seasonally adjusted 229,000 for the week ended Oct.28, the Labor Department said. That was not too far from 223,000, a 44-1/2-year low touched in mid-October. Economists had forecast claims rising to 235,000 in the latest week.Claims have dropped from an almost three-year high of 298,000 hit at the start of September in the aftermath of Hurricanes Harvey and Irma, which ravaged parts ofTexas and Florida. Harvey and Irma have largely dropped out of the data for the mainland United States.
The Labor Department, however, said claims-taking procedures continued to be severely disrupted in the Virgin Islands. The situation in Puerto Rico had improved and backlogs were now being processed, the department said.Irma and hurricane Maria destroyed infrastructure, virtually cutting off communication with the islands.Last week marked the 139th straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970, when the labor market was smaller.The labor market is near full employment, with the jobless rate at a more than 16-1/2-year low of 4.2 percent.
The dollar rose slightly against a basket of currencies after the data, while prices for U.S. Treasuries were little changed. The Fed kept interest rates unchanged on Wednesday.The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, dropped 7,250 to 232,500 last week. That was the lowest reading since April 1973.OCTOBER PAYROLLS SURGE EXPECTEDThe low level claims suggest a surge in job growth in October after nonfarm payrolls dropped by 33,000 jobs in September as Harvey and Irma left some workers temporarily unemployed.According to a Reuters survey of economists, the government's closely watched employment report due on Friday will probably show that payrolls increased by 310,000 jobs in October. The unemployment rate is seen unchanged at 4.2 percent.Diminishing labor market slack was also underscored by shrinking unemployment rolls. The claims report showed the number of people still receiving benefits after an initial week of aid fell 15,000 to 1.88 million in the week ended Oct. 21, the lowest level since December 1973.In a second report on Thursday, the Labor Department said nonfarm productivity, which measures hourly output per worker, rose at a 3.0 percent annualized rate. That was the quickest pace since the third quarter of 2014 and followed an unrevised 1.5 percent rate in the April-June period.Economists had forecast productivity rising at a 2.4 percent pace in the July-September quarter. The increase in productivity was flagged in last week's third-quarter gross domestic product report, which showed the economy growing at a 3.0 percent rate during that period.The trend in productivity, however, remains sluggish. Productivity increased at a 1.5 percent rate compared to the third quarter of 2016. Manufacturing productivity fell at a 5.0 percent rate last quarter, the steepest rate of decline since the first quarter of 2009.Worker productivity has increased at an average annual rate of 1.2 percent from 2007 to 2016, below its long-term rate of 2.1 percent from 1947 to 2016, which together with slowing population growth indicate the economy's potential growth rate has declined.This suggests the economy could struggle to achieve an annual growth rate of 3 percent, which is being targeted by the Trump administration through a mix of tax cuts and deregulation.With productivity rising in the last quarter, unit labor costs, the price of labor per single unit of output, increased at only a 0.5 percent pace. Unit labor costs rose at a 0.3 percent pace in the second quarter.Compared to the third quarter of 2016, unit labor costs fell at a 0.1 percent rate. The weak growth in unit labor costs came despite hourly compensation increasing at a 3.5 percent rate in the third quarter.Hours worked rose at a rate of 0.8 percent in the July-September quarter, the slowest pace since the third quarter of 2016, after rising at a 2.4 percent pace in the previous period.(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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