WASHINGTON: The number of Americans filing for unemployment benefits fell last week for the first time in a month and producer prices unexpectedly rose in June, likely keeping the Federal Reserve on course for a third interest rate increase this year. The data from the Labor Department underscored labour market buoyancy and suggested that there was enough momentum in the economy to generate some inflation, even though price pressures still remain moderate.
Initial claims for state unemployment benefits dropped 3,000 to a seasonally adjusted 247,000 for the week ended July 8, the Labour Department said. It was the 123rd straight week that claims remained below 300,000, a threshold associated with a healthy labour market. That is the longest such stretch since 1970, when the labour market was smaller. The labour market is near full employment, with the jobless rate at 4.4 per cent. The drop in first-time applications for jobless benefits followed data last week showing the economy created 222,000 jobs last month, the second biggest payrolls increase this year.
A Fed survey of the economy published on Wednesday showed “labour markets tightened further for both low- and high-skilled positions, particularly in the construction and IT sectors.”
Prices for US Treasuries fell, with the yield on the 30-year government bond hitting a session high. Stocks on Wall Street were trading slightly higher, while the dollar was little changed against a basket of currencies.
PRODUCER PRICES NUDGE UP: In another report, the Labour Department said its producer price index for final demand edged up 0.1 per cent last month amid sustained increases in the cost of services that offset declining energy prices.
That followed an unchanged reading in May. The year-on-year increase in the PPI, however, slowed to 2.0 per cent from 2.4 per cent in May as last year’s energy-driven rise dropped out of the calculation. Economists had forecast the PPI being unchanged last month and rising 1.9 per cent from a year ago.
A key gauge of underlying producer price pressures that excludes food, energy and trade services increased 0.2 per cent last month. The so-called core PPI fell 0.1 per cent in May.
The core PPI increased 2.0 per cent in the 12 months through June after climbing 2.1 per cent in May.
Fed officials are closely watching inflation, which has remained below the US central bank’s 2 per cent target for five years. They have largely viewed the recent retreat in price pressures as transitory. — Reuters
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