US labour market tightening, productivity still weak

WASHINGTON: The number of Americans filing for unemployment benefits fell more than expected last week, pointing to tightening labour market conditions that should support the economy this year.
Other data on Thursday showed worker productivity slowing in the fourth quarter, which economists said suggested companies would need to keep hiring to increase output.
Increased demand for workers against the backdrop of weak productivity and a shrinking labour pool is starting to put upward pressure on wages, paving the way for interest rate increases from the Federal Reserve this year.
“It looks like firms will have to keep hiring if they want to expand output, as productivity is barely growing,” said Joel Naroff, Chief Economist at Naroff Economic Advisors in Holland, Pennsylvania. “They are going to have to make do with their work forces as the labour market continues to tighten.”
Initial claims for state unemployment benefits fell 14,000 to a seasonally adjusted 246,000 for the week ended on January 28, the Labour Department said. Claims have now been below 300,000, a threshold associated with a healthy labour market, for 100 straight weeks. That is the longest stretch since 1970, when the labour market was much smaller.
The labour market is at or close to full employment, and the Fed said on Wednesday it expected labour market conditions would strengthen “somewhat further.” A tight labour market is expected to boost wage growth and support the economy through strong consumer spending and the continued recovery of the housing market.
The Fed, which has forecast three rate increases this year, kept its benchmark overnight lending rate unchanged in a range of 0.50 per cent to 0.75 per cent at the end of its latest two-day policy meeting on Wednesday. The US central bank increased borrowing costs in December.
The dollar was trading marginally lower against a basket of currencies, while prices for US government bonds rose. US stocks were trading slightly higher.
Economists had forecast first-time applications for jobless benefits falling to 250,000 in the latest week. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, rose 2,250 to 248,000 last week.
Last week’s claims data have no bearing on January’s employment report, which is due to be released on Friday, as they fall outside the survey period.
Although claims were low in January, a report on Thursday from global outplacement consultancy Challenger, Gray & Christmas showed US employers announced 45,934 job cuts last month, a 37 per cent jump from December and the largest number of cuts since April 2016.
Retailers announced 22,491 layoffs, accounting for 49 per cent of all job cuts recorded last month. Department store giant Macy’s, which is closing 68 stores, announced 10,000 job cuts last month. Other retailers announcing layoffs included The Limited, American Apparel, Sears and Abercrombie & Fitch.
Department stores have faced stiff competition from online rivals including Amazon.com. — Reuters