US weekly jobless claims rise, but labor market tightening

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WASHINGTON (May 24): New applications for US unemployment benefits increased more than expected last week, but continued to suggest that the labor market is tight.

Initial claims for state unemployment benefits rose 11,000 to a seasonally adjusted 234,000 for the week ended May 19, the Labor Department said on Thursday. Economists polled by Reuters had forecast claims slipping to 220,000 in the latest week.

Claims have now been below the 300,000 mark, which is associated with a strong jobs market, for 168 straight weeks. That is the longest such stretch since 1969, according to the Labor Department. The labor market is viewed as being close to or at full employment, with the jobless rate near a 17½-year low of 3.9%.

The unemployment rate is within striking distance of the Federal Reserve's forecast of 3.8% by the end of this year. Tightening labor market conditions and rising inflation will likely keep the US central bank on track to increase interest rates next month.

Minutes of the Fed's May 1-2 policy meeting published on Wednesday showed most officials believed "that if incoming information broadly confirmed their current economic outlook, it would likely soon be appropriate ... to take another step in removing policy accommodation."

The Fed raised borrowing costs in March and has forecast at least two more rate hikes for this year.

US financial markets were little moved by the claims data.

The four-week moving average of initial claims, viewed as a better measure of labor market trends as it irons out week-to-week volatility, increased 6,250 to 219,750 last week.

The claims report also showed the number of people receiving benefits after an initial week of aid increased 29,000 to 1.74 million in the week ended May 12. The four-week moving average of the so-called continuing claims fell 23,250 to 1.75 million, the lowest level since December 1973.

The continuing claims data covered the week of the household survey from which May's unemployment rate will be calculated.

The four-week average of continuing claims fell 97,250 between the April and May survey periods. The unemployment rate fell two-tenths of a percentage point in April after being stuck at 4.1% for six straight months.

Shrinking labor market slack bolsters economists' expectations that wage growth will accelerate in the second half of the year.