December 20, 2018 / 2:11 PM / in a month

U.S. weekly jobless claims rise; mid-Atlantic factory activity slows

WASHINGTON (Reuters) - The number of Americans filing applications for jobless benefits rose marginally from near a 49-year low last week, suggesting underlying strength in the labor market and broader economy.

FILE PHOTO: People wait in line to attend TechFair LA, a technology job fair, in Los Angeles, California, U.S., January 26, 2017. REUTERS/Lucy Nicholson

While other data on Thursday showed factory activity in the mid-Atlantic region slowing to near a 2-1/2-year low in December, manufacturers reported hiring more workers and were upbeat about business conditions over the next six months.

Concerns are growing that tightening financial market conditions, partly the result of a relentless selloff on Wall Street, could spill over into the labor market and economy. Economists said the weekly jobless claims data showed no sign that the financial market volatility was impacting on companies’ hiring decisions.

“This does not appear to be the case at present, and we still see the main signal from claims data as one of healthy labor market conditions,” said Michael Gapen, chief economist at Barclays in New York.

Initial claims for state unemployment benefits increased 8,000 to a seasonally adjusted 214,000 for the week ended Dec. 15, the Labor Department said. Claims had dropped to 206,000 in the prior week, close to the 202,000 reached in mid-September, which was the lowest level since December 1969.

Economists polled by Reuters had forecast claims increasing to 216,000 in the latest week.

The Federal Reserve raised interest rates on Wednesday for the fourth time this year, but forecast fewer rate hikes next year and signaled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.

The U.S. central bank said “the labor market has continued to strengthen,” and described job gains as having been “strong, on average, in recent months.”

The Labor Department said no claims were estimated last week. Claims have been volatile in recent weeks, with some economists saying an early Thanksgiving holiday had pulled forward seasonal layoffs, throwing off a model that the government uses to smooth the data for seasonal fluctuations.

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 2,750 to 222,000 last week. A jump in filings to an eight-month high of 235,000 during the week ended Nov. 24 had stirred concerns the labor market was slowing.

U.S. financial markets were little moved by the data as investors digested the Fed’s interest rate decision and projections for monetary policy next year. U.S. Treasury yields fell to more than eight-month lows. The dollar .DXY dropped against a basket of currencies and U.S. stocks were trading lower.

TIGHT LABOR MARKET

Last week’s claims data covered the survey period for the nonfarm payrolls component of December’s employment report. Claims fell 11,000 between the November and December survey weeks, suggesting some improvement in job growth this month.

Nonfarm payrolls increased by 155,000 jobs last month after surging by 237,000 in October.

November’s slowdown in job growth was largely blamed on a shortage of workers amid a tight labor market. The unemployment rate is near a 49-year low of 3.7 percent and not too far from the Fed’s forecast of 3.5 percent by the end of 2019.

“Payrolls should post a solid gain and the unemployment rate has a strong chance of slipping to 3.6 percent,” said John Ryding, chief economist at RDQ Economics in New York.

Tightening labor market conditions are pushing up wage growth, helping to underpin consumer spending.

In a separate report on Thursday, the Philadelphia Fed said its business conditions index fell to a reading of 9.4 in December. That was the lowest level since August 2016 and followed a reading of 12.9 in November.

The moderation in manufacturing in the region that covers eastern Pennsylvania, southern New Jersey and Delaware is broadly in line with other data suggesting some softening in national factory activity amid slowing global demand.

A report from the New York Fed earlier this week showed a sharp drop in its Empire State manufacturing index in December.

“The manufacturing sector is more exposed than the overall economy to slowing in foreign growth,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in White Plains, New York.

Manufacturers in the mid-Atlantic region, however, continued to report overall higher employment. The survey’s measure of factory employment increased to a reading of 18.3 this month from 16.3 in November.

Factories also reported strong growth in new orders and unfilled orders this month. But the survey’s current shipments index decreased 12 points to its lowest reading in 27 months. Manufacturers were upbeat about the next six months, with more than 43 percent of the firms expecting increases in activity, while 12 percent anticipated declines.

Reporting by Lucia Mutikani; Editing by Paul Simao

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