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US labour market remains strong, economy slowing

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WASHINGTON: The number of Americans filing applications for unemployment benefits fell to more than a 49-year low last week, but the drop likely overstates the health of the labour market as claims for several states including California were estimated.


Still, labour market conditions remain strong, which for now should help to temper fears of a sharp slowdown in economic growth. Other data on Thursday showed a gauge of future US economic activity fell in December.


The economy is facing several headwinds, including a bitter US trade dispute with China and a month-long partial shutdown of the federal government, which are hurting consumer and business confidence. Higher interest rates, fading fiscal stimulus and cooling global economies are also seen crimping domestic growth.


“If you’re looking for good news on the economy, look no further than the labour market,” said Jim Baird, chief investment officer at Plante Moran Financial Advisers in Kalamazoo, Michigan. “Growth may be slowing, but the overall picture for workers and those seeking work remains quite positive.”


Initial claims for state unemployment benefits dropped 13,000 to a seasonally adjusted 199,000 for the week ended January 19, the lowest level since mid-November in 1969 when 197,000 applications were recorded, the Labour Department said.


Economists polled by Reuters had forecast claims rising to 220,000 in the latest week. The Labour Department said claims for California, Kansas, North Dakota, Virginia, West Virginia and Hawaii were estimated last week because of Monday’s Martin Luther King holiday.


The four-week moving average of initial claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 5,500 to 215,000 last week.


About one-quarter of federal agencies have been shuttered since December 22, impacting 800,000 government employees, with many working without pay and others furloughed. All workers will be paid retroactively when the shutdown ends.


But economists expect the longest shutdown in history will push the unemployment rate above 4.0 per cent in January as the furloughed workers would be considered unemployed.


The jobless rate rose two-tenths of a percentage point to 3.9 per cent in December as strong labour market conditions attracted some unemployed people back into the labour force.


Stocks on Wall Street were trading mixed after US Commerce Secretary Wilbur Ross said Washington and Beijing were a long way from resolving their trade dispute. The dollar was stronger against a basket of currencies, while prices of US Treasuries rose.


Thursday’s claims report showed the number of people receiving benefits after an initial week of aid decreased 24,000 to 1.71 million for the week ended Jan 12. The so-called continuing claims data covered the week of the household survey from which January’s unemployment rate will be calculated.


Continuing claims rose 5,000 between the December and January survey periods. If there were no government shutdown, the modest gain between the survey weeks would suggest little change in the unemployment rate this month.


The number of federal workers filing for jobless benefits rose 14,965 to 25,419 in the week ending January 12. The Commerce Department is one of the agencies whose funding has lapsed as a result of the deadlock in Washington.


The publishing of data produced by the department’s Bureau of Economic Analysis and Census Bureau has been suspended, leaving economists, investors, businesses and policymakers in the dark about the economy’s health.


— Reuters



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