WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits fell last week, pointing to moderate job growth despite slowing economic activity.
Initial claims for state unemployment benefits declined 11,000 to a seasonally adjusted 346,000, the Labor Department said on Thursday. That was in line with economists’ expectations.
Claims have been volatile in recent weeks, but there is little in the numbers to suggest a shift in the moderate pace of job gains, even though the broader economy is struggling under the weight of higher taxes and deep government spending cuts.
Still, the improvement in labor market conditions lacks enough vigor to compel the Federal Reserve to scale back its expansive monetary stimulus.
The Fed’s policy-setting committee meets June 18-19. With data ranging from manufacturing to consumer spending showing the economy hit a soft patch early in the second quarter, it is unlikely the U.S. central bank will announce a tapering of the $85 billion in bonds it is buying each month at that meeting.
“The U.S. labor market is still improving steadily, just not at a strong enough pace to warrant Fed tapering yet,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
The four-week moving average for new claims, which irons out week-to-week volatility, rose 4,500 to 352,500.
U.S. financial markets were little moved by the data as investors shifted focus to the euro zone, where the European Central Bank kept its main interest rate steady at a record low. Investors also moved to the sidelines ahead of Friday’s release of the government’s closely watched employment report for May.
Last week’s claims data has no bearing on the employment report, given that it falls outside of the survey period for the monthly jobs tally.
Employers are forecast to have added 170,000 jobs to their payrolls last month, slightly up from April’s 165,000 count, according to a Reuters survey of economists. The unemployment rate is seen holding at an almost 4-1/2 year low of 7.5 percent.
There is a risk, however, that job gains could have been less than expected in May.
Reports from the Institute for Supply Management showed a measure of employment in the services sector hit a 10-month low in May, while a gauge of factory jobs slipped a bit.
In addition, the ADP National Employment Report showed private hiring in May fell well below expectations.
Despite the slowdown in growth momentum, companies are not responding by reducing their workforces. There is still no sign of layoffs related to the deep government spending cuts.
In a separate report, outplacement firm Challenger, Gray & Christmas said the number of planned layoffs at U.S. firms fell in May for a third straight month.
Employers announced 36,398 job cuts last month, down 4.5 percent from April. Layoffs fell 41.2 percent from a year ago.
“So far, the threat of massive job cuts related to federal spending cuts has failed to materialize”, said John Challenger, the firm’s chief executive officer.
The steady labor market improvement, coupled with rising house and share prices, is helping to support retail sales.
Major U.S. retail chains including Costco Wholesale Corp and Victoria’s Secret reported sales increases for May that were generally in line with Wall Street’s expectations, other data showed.
Reporting by Lucia Mutikani Additional reporting by Leah Schnurr in New York; Editing by Andrea Ricci