Upbeat data suggest U.S. economy still on moderate growth path

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing applications for unemployment benefits increased less than expected last week, pointing to strong labor market conditions that should continue to support an economy growing at a moderate pace.

The steady economic growth pace was also underscored by other data on Thursday showing home resales rising in August to a 17-month high. While factory activity in the mid-Atlantic region slowed in September, orders remained solid, leading manufacturers in the region to increase employment and boost hours for workers.

The reports suggested that housing and manufacturing, the two weak spots in the economy, were stabilizing. The Federal Reserve cut interest rates by another 25 basis points on Wednesday, citing risks to the longest economic expansion in history from a year-long U.S.-China trade war and slowing economic growth overseas.

Fed Chair Jerome Powell said he expected the economy, now in its 11th year of expansion, to continue to “expand at a moderate rate,” but noted trade tensions were “weighing on U.S. investment and exports.”

The U.S. central bank cut rates in July for the first time since 2008. The Fed offered mixed signals on further monetary policy easing. Data, including retail sales, so far in the third quarter suggest the economy is growing close to the April-June quarter’s 2.0% annualized rate.

Financial markets have been flagging a recession. The Atlanta Fed is estimating gross domestic product rising at a 1.9% pace this quarter.

“Fed officials are done cutting interest rates for the rest of this year and one of the reasons for this is that the economic data continue to surprise us on the upside,” said Chris Rupkey, chief economist at MUFG in New York.

Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 208,000 for the week ended Sept. 14, the government said. Economists polled by Reuters had forecast claims increasing to 213,000 in the latest week.

Layoffs remain low despite the trade tensions, which have weighed on business investment and manufacturing. But there are concerns that slowing job growth could take some shine off robust consumer spending, which is largely driving the economy.

Last week’s claims data covered the survey period for the nonfarm payrolls component of September’s employment report. Claims were little changed between the August and September survey periods suggesting a steady pace of job growth this month.

The economy created 130,000 jobs in August. Economists say it is unclear whether the loss of momentum in hiring is due to ebbing demand for labor or a shortage of qualified workers.

Job gains have averaged 158,000 per month this year, still above the roughly 100,000 per month needed to keep up with growth in the working-age population and sustain a healthy pace of consumer spending.

“If there was a problem in the labor market it would be visible in initial claims and they are not raising any red flags,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Though business confidence has dropped noticeably this year, it hasn’t led businesses to lay off workers yet.”

The dollar fell against a basket of currencies, while prices for U.S. Treasuries rose. Stocks on Wall Street were trading higher, with Microsoft’s planned share buy-back helping to push the benchmark S&P 500 within striking distance of its record high.

SOLID HOME SALES

In a second report on Thursday, the National Association of Realtors said existing-home sales increased 1.3% to a seasonally adjusted annual rate of 5.49 million units last month.

That was the second straight monthly gain in sales and confounded economists expectations for a 0.4% drop to 5.37 million units.

The increase in home resales, which make up about 90 percent of U.S. home sales, came on the heels of data on Wednesday showing housing starts and building permits surged to a more than 12-year high in August. The housing market, which hit a soft patch last year, is being lifted by lower mortgage rates.

But the sector is not yet out of the woods as builders continue to grapple with land and labor shortages, which have constrained their ability to construct more of the sought-after lower-priced homes.

“It appears that the housing market is gaining some momentum as autumn approaches,” said Matthew Speakman, an economist at online real estate database company Zillow. “Even stronger sales volumes may be around the corner given that mortgage rates plummeted in August.”

In a third report, the Philadelphia Fed said it’s business conditions index fell to a reading of 12.0 in September from 16.8 in August. The survey’s measure of new orders dipped to 24.8 this month from 25.8.

Its measure of factory employment in the region that covers eastern Pennsylvania, southern New Jersey and Delaware jumped to a reading of 15.8 in September from 3.6 in the prior month. A gauge of the factory workweek increased to a reading of 13.0 from 6.8 in August.

Manufacturing, which makes up about 11% of the economy, has shouldered the brunt of the U.S.-China trade war. A measure of national manufacturing activity contracted in August for the first time in three years.

While factory surveys have remained weak, so-called hard data have suggested the manufacturing downturn could soon run its course. Manufacturing production rebounded 0.5% in August after falling 0.4% in July, the Fed reported on Tuesday.

“It is hard to explain the month-to-month changes in the different business surveys and the differences across the various measures, but with manufacturing output rising in recent months, some of the other surveys that have been weak may start to firm up and look more like the Philadelphia Fed survey,” said Daniel Silver, an economist at JPMorgan in New York.

(Reporting by Lucia Mutikan, Additional reporting by Lindsay Dunsmuir; Editing by Chris Reese and Andrea Ricci)

U.S. consumer spending strong; manufacturing struggling

FILE PHOTO: People tour The Shops during the grand opening of The Hudson Yards development, a residential, commercial, and retail space on Manhattan's West side in New York City, New York, U.S., March 15, 2019. REUTERS/Brendan McDermid

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales surged in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, which could help to assuage financial market fears that the economy was heading into recession.

The upbeat report from the Commerce Department on Thursday, however, will likely not change expectations that the Federal Reserve will cut interest rates again next month as news from the manufacturing sector remains dour, underscoring the darkening outlook for the economy against the backdrop of trade tensions and slowing growth overseas.

A key part of the U.S. Treasury yield curve inverted on Wednesday for the first time since June 2007, triggering a stock market sell-off. An inverted Treasury yield curve is historically a reliable predictor of looming recessions.

Financial markets have fully priced in a 25-basis-point rate cut at the U.S. central bank’s Sept. 17-18 policy meeting. The Fed lowered its short-term interest rate by a quarter of a percentage point last month, citing the acrimonious U.S.-China trade war and slowing global economies.

But the data could push markets to dial back expectations of a 50-basis-point rate cut next month.

“So yes, consumers are lifting economic growth and easing pressure on the Federal Reserve to cut more aggressively, but the trade war itself, and the rhetoric that accompanies it will push for more rate cuts,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.

Retail sales increased 0.7% last month after gaining 0.3% in June, the government said. Economists polled by Reuters had forecast retail sales would rise 0.3% in July. Compared to July last year, retail sales increased 3.4%.

Excluding automobiles, gasoline, building materials and food services, retail sales jumped 1.0% last month after advancing by an unrevised 0.7% in June. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

U.S. stock index futures extended gains after the release of the data. U.S. Treasury yields rose while the dollar <.DXY> was slightly weaker against a basket of currencies.

STRONG LABOR MARKET

July’s gain in core retail sales suggested strong consumer spending early in the third quarter, though the pace will likely slow from the April-June quarter’s robust 4.3% annualized rate. Consumer spending, which accounts for more than two-thirds of the economy, is being underpinned by the lowest unemployment rate in nearly half a century.

While a separate report from the Labor Department on Thursday showed an increase in the number of Americans filing applications for unemployment benefits last week, the trend in claims continued to point to a strong labor market.

Solid consumer spending is blunting some of the hit on the economy from the downturn in manufacturing, which is underscored by weak business investment. There are, however, red flags for the labor market coming from manufacturing.

The sector’s struggles were highlighted by a third report from the Fed on Thursday showing factory production dropped 0.4% in July. Output at factories has declined more than 1.5% since December 2018. Manufacturing, which makes up about 12% of the economy, is also being weighed down by an inventory overhang, especially in the automotive sector.

Manufacturing productivity tumbled at its fastest pace in nearly two years in the second quarter, with factories cutting hours for workers, another report from the Labor Department showed.

Manufacturing’s troubles appear to have persisted into the third quarter. Though a report from the Philadelphia Fed on Thursday showed factory activity in the mid-Atlantic region slowed less than expected in August amid an increase in new orders, manufacturers reported hiring fewer workers.

A measure of factory employment dropped to its lowest level since November 2016. The weakness in factory employment in the region that covers eastern Pennsylvania, southern New Jersey and Delaware was mirrored by another survey from the New York Fed. Activity in New York state was little changed this month, with employment measures deteriorating further.

“The health of factories is still an important driver of growth and the soft patch for production remains a factor that is keeping economic growth in the slow lane,” said Chris Rupkey, chief economist at MUFG in New York.

The economy grew at a 2.1% rate in the second quarter, decelerating from the first quarter’s 3.1% pace. Growth estimates for the third quarter are below a 2.0% rate.

In July, auto sales fell 0.6% after rising 0.3% in June. Receipts at service stations rebounded 1.8%, reflecting higher gasoline prices. Sales at building material stores gained 0.2%.

Receipts at clothing stores increased 0.8%. Online and mail-order retail sales jumped 2.8%, the most in six months, after rising 1.9% in June. They were likely boosted by Amazon.com Inc’s <AMZN.O> Prime Day.

Receipts at furniture stores rose 0.3%. Sales at restaurants and bars accelerated 1.1%. But spending at hobby, musical instrument and book stores dropped 1.1% last month.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. weekly jobless claims underscore labor market strength

FILE PHOTO: People wait in line to enter the Nassau County Mega Job Fair at Nassau Veterans Memorial Coliseum in Uniondale, New York October 7, 2014. REUTERS/Shannon Stapleton/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing applications for unemployment benefits unexpectedly fell last week, pointing to sustained labor market strength even as the economy slows.

The economy, which received a temporary boost from volatile exports and inventory accumulation in the first quarter, is losing momentum as last year’s massive stimulus from the Trump administration’s tax cuts and spending increases fades.

Initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 211,000 for the week ended May 18, the Labor Department said on Thursday. Data for the prior week was unrevised. Claims have now declined for three straight weeks.

Economists polled by Reuters had forecast claims would rise to 215,000 in the latest week. The Labor Department said no states were estimated last week.

U.S. stock index futures held losses and the dollar dipped against a basket of currencies after the release of the data. Prices of U.S. Treasuries were trading higher. Claims are settling down after some volatility in late April caused by difficulties adjusting the data for seasonal fluctuations around moving holidays like Easter, Passover and school spring breaks.

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, dropped 4,750 to 220,250 last week.

Continuing strength in labor market conditions, marked by a the lowest unemployment rate in nearly 50 years, is likely to underpin the economy as it shifts into lower gear.

Retail sales and production at factories fell in April, while the housing market has mostly remained soft.

Gross domestic product estimates for the second quarter are below a 2.0 percent annualized rate. The economy grew at a 3.2 percent pace in the first quarter.

Last week’s claims data covered the survey period for the nonfarm payrolls component of May’s employment report.

The four-week average of claims increased 18,750 between the April and May survey periods, suggesting some moderation in employment gains after payrolls surged by 263,000 jobs last month. The unemployment rate is at 3.6 percent.

Thursday’s claims report showed the number of people receiving benefits after an initial week of aid rose 12,000 to 1.68 million for the week ended May 11.

The four-week moving average of the so-called continuing claims increased 5,500 to 1.67 million.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. retail sales, jobless claims data brighten economic picture

FILE PHOTO: People walk with shopping bags at Roosevelt Field mall in Garden City, New York, U.S., December 7, 2018. REUTERS/Shannon Stapleton

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales increased by the most in 1-1/2 years in March as households boosted purchases of motor vehicles and a range of other goods, the latest indication that economic growth picked up in the first quarter after a false start.

The economy’s enduring strength was underscored by other data on Thursday showing the number of Americans filing applications for unemployment benefits dropped to the lowest in nearly 50 years last week.

Fears of an abrupt slowdown in activity escalated at the turn of the year after a batch of weak economic reports. But those concerns have dissipated in recent weeks amid fairly upbeat data on trade, inventories and construction spending that have suggested growth last quarter could actually be better than the moderate pace logged in the final three months of 2018.

A report from the Federal Reserve on Wednesday described economic activity as expanding at a “slight-to-moderate” pace in March and early April. The Fed’s “Beige Book” report of anecdotal information on business activity collected from contacts nationwide showed a “few” of the U.S. central bank’s districts reported “some strengthening.”

“Supported by strong labor market conditions and improving wage growth, household spending appears well positioned to increase in the coming months,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan. “Fears about the softening in the economy were overblown.”

The Commerce Department said retail sales surged 1.6 percent last month. That was the biggest increase since September 2017 and followed an unrevised 0.2 percent drop in February.

Economists polled by Reuters had forecast retail sales would accelerate 0.9 percent in March. Retail sales in March advanced 3.6 percent from a year ago.

With March’s rebound, retail sales have now erased December’s plunge, which had put consumer spending and the overall economy on a sharply lower growth trajectory. Retail sales last month were probably lifted by tax refunds, even though they have been smaller than in previous years, following the revamping of the U.S. tax code in January 2018.

Excluding automobiles, gasoline, building materials and food services, retail sales rebounded 1.0 percent in March after a downwardly revised 0.3 percent decline in February. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

They were previously reported to have decreased 0.2 percent in February. Consumer spending accounts for more than two-thirds of economic activity and is being buoyed by a tightening labor market that is driving up wage growth.

STRONG LABOR MARKET

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 192,000 for the week ended April 13, the lowest level since September 1969. Claims have now declined for five straight weeks. Economists had forecast claims would rise to 205,000 in the latest week.

Though the trend in hiring has slowed, job gains remain above the roughly 100,000 needed per month to keep up with growth in the working-age population. The unemployment rate is at 3.8 percent, near the 3.7 percent Fed officials project it will be by the end of the year.

The dollar was trading higher against a basket of currencies while stocks on Wall Street were mixed. Prices of U.S. Treasuries were up.

March’s strong core retail sales could result in the further upgrading of first-quarter GDP estimates. Growth forecasts for the first quarter were boosted to around a 2.5 percent annualized rate on Wednesday after data showed the U.S. trade deficit narrowed for a second straight month in February.

First-quarter growth forecasts have been raised from as low as a 0.5 percent rate following relatively strong reports on trade, inventories and construction spending. The economy grew at a 2.2 percent pace in the fourth quarter.

Another report from the Commerce Department on Thursday showed business inventories rose in February and stock accumulation in the prior month was a bit stronger than initially estimated, a potential boost to growth.

Stronger growth in the first quarter will probably not change the view that the economy will slow this year as the stimulus from a $1.5 trillion tax cut package diminishes and the impact of interest rate hikes over the last few years lingers.

It also is unlikely to have any impact on monetary policy after the Fed recently suspended its three-year campaign to tighten monetary policy. The central bank dropped projections for any rate hikes this year after increasing borrowing costs four times in 2018.

In March, sales at auto dealerships jumped 3.1 percent, the most since September 2017. Receipts at service stations increased 3.5 percent, likely reflecting higher gasoline prices.

Receipts at clothing stores shot up 2.0 percent, the largest increase since last May. There were also increases in sales at furniture outlets, electronics and appliances shops, and food and beverage stores. Sales at building materials and garden equipment and supplies also rose last month.

Online and mail-order retail sales increased 1.2 percent in March. Sales at restaurants and bars climbed 0.8 percent, the most since last July. But receipts at hobby, musical instrument and book stores fell 0.3 percent last month.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Americans filing applications for unemployment benefits fall to lowest level since 1969

FILE PHOTO - People attend the Executive Branch Job Fair hosted by the Conservative Partnership Institute at the Dirksen Senate Office Building in Washington, U.S., June 15, 2018. REUTERS/Toya Sarno Jordan/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing applications for unemployment benefits fell to a more than 49-year low last week, pointing to sustained labor market strength despite slowing economic growth.

Other data on Thursday showed U.S.-based companies announced fewer layoffs in March, but job cuts for the first quarter were the highest since 2015. The economy is losing momentum as the stimulus from a $1.5 trillion tax cut package fades

Initial claims for state unemployment benefits declined 10,000 to a seasonally adjusted 202,000 for the week ended March 30, the lowest level since early December 1969, the Labor Department said. Data for the prior week was revised to show 1,000 more applications received than previously reported.

Economists polled by Reuters had forecast claims rising to 216,000 in the latest week. The Labor Department said only claims for California were estimated.

The claims data has shown no significant pickup in layoffs and there have been reports of companies reluctant to let go of workers amid a growing shortage of skilled labor. The scarcity of workers contributed to a recent slowdown in hiring.

Job growth has slowed from last year’s roughly 225,000 monthly average pace. The pace of increase, however, remains more than sufficient to keep up with growth in the working age population, holding down the unemployment rate.

U.S. Treasuries prices pared gains after the data, while the dollar was little changed against a basket of currencies.

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 4,000 to 213,500 last week, the lowest level since early October 2018.

The claims data has no bearing on March’s employment report, which is scheduled for release on Friday. According to a Reuters survey of economists, nonfarm payrolls likely increased by 180,000 jobs last month after a meager 20,000 in February, which was seen as pay-back after robust gains in the prior two months.

The unemployment rate is forecast unchanged at 3.8 percent.

A separate report on Thursday from global outplacement consultancy Challenger, Gray &amp; Christmas showed planned job cuts by U.S.-based employers dropped 21 percent to 60,587 in March.

However, layoffs in the first quarter jumped 10.3 percent to 190,410 from the last three months of 2018. That was the highest since the third quarter of 2015 and was partly blamed on “economic uncertainty and fears of an upcoming downturn.”

Retailers continued to lead job cuts, purging 46,061 positions in the first quarter. The automotive sector eliminated 8,838 jobs in March, leading to 15,887 layoffs by auto manufacturers and suppliers in the first quarter. Redundancies were also high in the energy and financial sectors.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. weekly jobless claims jump to near one-and-a-half year high

FILE PHOTO - A man holds a leaflet at a military veterans' job fair in Carson, California October 3, 2014. REUTERS/Lucy Nicholson

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing applications for unemployment benefits surged to near a 1-1/2-year high last week, but economists dismissed the jump as a fluke and said temporary factors, including a partial government shutdown, were to blame.

A strike by teachers in California, cold weather and difficulties adjusting the data around moving holidays like Martin Luther King Jr. Day also likely were factors in the spurt in claims reported by the Labor Department on Thursday.

“We are skeptical the rise could reflect a true weakening in the labor market given that there are few other signs of weaker labor markets in January,” said John Ryding, chief economist at RDQ Economic in New York. “Nonetheless, if we maintain this higher level of jobless claims in the coming weeks, that would indicate a pickup in layoff activity.”

Initial claims for state unemployment benefits jumped 53,000 to a seasonally adjusted 253,000 for the week ended Jan. 26, the highest level since September 2017, the Labor Department said. The rise was also the largest since September 2017.

Claims dropped to 200,000 in the prior week, which was the lowest level since October 1969. Economists polled by Reuters had forecast claims rising to only 215,000 in the latest week.

The claims data covered the Martin Luther King Jr. holiday, which occurred later this year than in the past. Economists believe non-federal government workers who were temporarily unemployed during the longest government shutdown in the country’s history likely helped to boost claims last week.

The surge in claims came amid a recent deterioration in business and consumer confidence, which was partly blamed on a five-week government shutdown that has since ended.

The Federal Reserve on Wednesday kept interest rates steady but said it would be patient in lifting borrowing costs further this year in a nod to growing uncertainty over the economy’s outlook. The U.S. central bank removed language from its December policy statement that risks to the outlook were “roughly balanced.”

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 5,000 to 220,250 last week.

The claims data has no bearing on January’s employment report, which is scheduled for release on Friday, as it falls outside the survey period. According to a Reuters survey of economists, non-farm payrolls likely increased by 165,000 jobs in January after jumping by 312,000 in December.

The 35-day government shutdown is not expected to have an impact on January’s job growth, as workers who were furloughed will be paid retroactively together with colleagues who worked without pay. However, those workers who stayed at home during the shutdown are expected to temporarily push up the unemployment rate in January.

The dollar fell against most major currencies, dropping to a two-week low versus the yen, pressured by the Fed’s cautious economic outlook. U.S. Treasury yields fell, while stocks on Wall Street were trading mostly higher.

STEADY WAGE GAINS

Underscoring the labor market’s strength, another report on Thursday from the Labor Department showed its Employment Cost Index, the broadest measure of labor costs, increased 0.7 percent in the fourth quarter after rising 0.8 percent in the July-September period.

The fourth quarter rise lifted the year-on-year rate of increase in labor costs to 2.9 percent, the biggest gain since June 2008, from 2.8 percent in the 12 months through September.

Wages and salaries, which account for 70 percent of employment costs, rose 0.6 percent in the fourth quarter after advancing 0.9 percent in the prior period. They were up 3.1 percent in the 12 months through December.

That was the biggest increase since June 2008 and followed a 2.9 percent gain in the year through September.

“It supports our view that the tightness in the labor market is generating upward pressure on compensation,” said Daniel Silver, an economist at JPMorgan in New York.

While the labor market is on solid footing, manufacturing appears to be slowing. A third report on Thursday showed the MNI Chicago business barometer dropped 7.1 points to a reading of 56.7 in January as new orders tumbled to a two-year low. The survey’s measure of production dropped to a 10-month low.

There was some good news on the housing market. The Commerce Department reported new home sales vaulted 16.9 percent in November to a seasonally adjusted annual rate of 657,000 units. The surge erased October’s 8.3 percent plunge in single-family home sales.

The November home sales report was delayed by the government shutdown, which affected the Commerce Department.

The housing market struggled in 2018, weighed down by acute shortages of homes for sales, which boosted prices, as well as higher mortgage rates. But there are glimmers of hope as house price inflation has slowed significantly and mortgage rates have eased after shooting up last year.

Supply, however, still remains tight.

“We expect a further rise in new home sales during 2019 as homebuyers look to new builds, with inventory conditions for existing homes still extremely tight,” said Ben Ayers, senior economist at Nationwide in Columbus, Ohio.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)

U.S. private payrolls surge in December; weekly jobless claims rise

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. private payrolls increased by the most in nearly two years in December, suggesting sustained strength in the labor market despite ongoing financial market volatility.

While other data on Thursday showed the number of Americans filing applications for unemployment benefits increased more than expected last week, the underlying trend in claims remained low. Claims data tend to be volatile around year-end holidays.

Labor market data is being closely watched for signs of whether tightening financial conditions could be impacting on companies’ hiring decisions. A sharp stock market sell-off has stoked fears about the economy’s health.

The ADP National Employment Report showed private payrolls rose by 271,000 jobs last month after a downwardly revised 157,000 increase in November. Economists polled by Reuters had forecast private payrolls advancing 178,000 last month following a previously reported 179,000 increase in November.

The ADP report, which is jointly developed with Moody’s Analytics, was published ahead of the government’s more comprehensive employment report for December scheduled for release on Friday.

The ADP report has a spotty record predicting the private-payrolls component of the government’s employment report and last month’s jump probably exaggerates the strength of the labor market.

“The December ADP data have been especially unreliable because of the challenge of adjusting for ‘purging’ effects,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in White Plains, New York.

“December is typically when employers drop from their listings all individuals who have left their firms permanently,” he said. “Such workers are dropped from the government data when they are no longer being paid, but some employers keep former employees on their lists for ADP until year-end tax documents have been filed.”

According to a Reuters survey of economists, nonfarm payrolls likely increased by 177,000 jobs last month after rising 155,000 in November. The unemployment rate is forecast steady near a 49-year low of 3.7 percent, not too far from the Federal Reserve’s forecast of 3.5 percent by the end of 2019.

With the labor market viewed at being at or beyond full employment, the pace of job growth is slowing as employers struggle to find workers. Some of the moderation in employment gains has been attributed to the stock market rout.

The Fed raised interest rates last month for the fourth time in 2018, but forecast fewer rate hikes this year and signaled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.

U.S. financial markets were little moved by the data.

In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits rose 10,000 to a seasonally adjusted 231,000 for the week ended Dec. 29. Data for the prior week was revised higher to show 5,000 more applications received than previously reported.

Economists polled by Reuters had forecast claims increasing to 220,000 in the latest week.

The Labor Department said claims for California and Virginia were estimated last week. Unadjusted claims for both of those states declined last week.

A Labor Department official said there was no indication of an increase in filings last week from federal workers furloughed because of a partial shutdown of the government that is now in its second week.

Data on claims filed by federal employees is released with a one-week lag. The shutdown, which started on Dec. 22, was triggered by President Donald Trump’s demand for $5 billion in border wall funding.

Some 800,000 employees from the Departments of Homeland Security, Transportation, Commerce and others have been furloughed or are working without pay.

Claims data tends to be noisy around year-end holidays. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, slipped 500 to 218,750 last week.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

To quell unrest, France’s Macron speeds up tax cuts but vows no U-turn

French President Emmanuel Macron speaks during a special address to the nation, his first public comments after four weeks of nationwide 'yellow vest' (gilet jaune) protests, at the Elysee Palace, in Paris, France December 10, 2018. Ludovic Marin/Pool via REUTERS

By Michel Rose and John Irish

PARIS (Reuters) – President Emmanuel Macron on Monday announced wage rises for the poorest workers and tax cuts for pensioners in further concessions meant to defuse weeks of often violent protests that have challenged his authority.

In his first national address following two weekends of France’s worst unrest for years, Macron sought to restore calm and struck a humble tone after accusations that his governing style and economic policies were fracturing the country.

But he refused to reinstate a wealth tax and to back down on his reform agenda, which he said would proceed in 2019 with overhauls of pensions, unemployment benefits and public expenditures.

“We will respond to the economic and social urgency with strong measures, by cutting taxes more rapidly, by keeping our spending under control, but not with U-turns,” Macron said in the 13-minute TV address from the Elysee Palace.

Protesters wearing yellow vests watch French President Emmanuel Macron on a computer screen in Sainte-Eulalie, France, December 10, 2018. REUTERS/Regis Duvignau

Protesters wearing yellow vests watch French President Emmanuel Macron on a computer screen in Sainte-Eulalie, France, December 10, 2018. REUTERS/Regis Duvignau

His response came 48 hours after protesters fought street battles with riot police, torching cars and looting shops – the fourth weekend of protests for the so-called “yellow vest” movement which started as a revolt against high fuel costs.

In measures that are likely to cost billions to state coffers, Macron said people on the minimum wage would see their salaries rise by 100 euros a month in 2019 without extra costs to employers.

His labor minister said this would be achieved by the government topping up small salaries.

Pensioners earning less than 2,000 euros will see this year’s increase in social security taxes scrapped, Macron said, going back on a measure that had particularly hurt his popularity with older voters.

“The effort we asked for was too big and was not fair.”

Asked whether the budget deficit would be kept below the EU limit of 3 percent, an Elysee official said France had some wiggle room on spending if a one-off tax rebate, which inflates its deficit by 20 billion euros in 2019, was not taken into account.

Macron faced a delicate task: he needed to persuade the middle class and blue-collar workers that he heard their anger over a squeeze on household spending, without being exposed to charges of caving in to street politics.

The 40-year old former investment banker was also under pressure to make amends about cutting remarks he made in the past year and a half that critics said made him look aloof and arrogant.

“No doubt over the past year and a half we have not provided answers that were strong and quick enough. I take my share of responsibility,” he said.

“I may have given the impression that I did not care about that, that I had other priorities. I also know that I have hurt some of you with my words.”

Political opponents, who have largely failed so far to tap into the discontent from the leaderless “yellow vest”, criticized Macron’s response as insufficient.

“Emmanuel Macron thought he could hand out some cash to calm the citizen’s insurrection that has erupted,” Jean-Luc Melenchon, leader of the far-left La France Insoumise, said.

“I believe that Act V (of the protests) will play out on Saturday,” he said referring to a new round of protests planned this weekend.

One of the faces of the “yellow vest” movement appeared unconvinced as well.

“In terms of substance, these are half measures. We can feel that Macron has got a lot more to give,” Benjamin Cauchy, who met the French leader last week, told France 2 television.

 

(Additional reporting by Geert de Clercq, Caroline Pailliez, Richard Lough, Leigh Thomas, Pascale Denis, Jean-Baptiste Vey, Marine Pennetier in Paris and Dhara Ranasinghe in London, Editing by Mark Heinrich)

U.S. inflation steadily firming; labor market strong

FILE PHOTO: People shop in Macy's Herald Square in Manhattan, New York, U.S., November 23, 2017. REUTERS/Andrew Kelly/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices barely rose in June, but the underlying trend continued to point to a steady buildup of inflation pressures that could keep the Federal Reserve on a path of gradual interest rate increases.

Other data on Thursday showed first-time applications for unemployment benefits dropped to a two-month low last week as the labor market continues to tighten. The Fed raised interest rates in June for a second time this year and has forecast two more rate hikes before the end of 2018.

“U.S. inflation continues to drift gradually higher in response to a nearly fully employed economy, with some nudging from tariffs,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “The Fed has every reason to pull the rate trigger again in October.”

The Labor Department said its Consumer Price Index edged up 0.1 percent as gasoline price increases moderated and the cost of apparel fell. The CPI rose 0.2 percent in May. In the 12 months through June, the CPI increased 2.9 percent, the biggest gain since February 2012, after advancing 2.8 percent in May.

Excluding the volatile food and energy components, the CPI rose 0.2 percent, matching May’s gain. That lifted the annual increase in the so-called core CPI to 2.3 percent, the largest rise since January 2017, from 2.2 percent in May.

Economists polled by Reuters had forecast both the CPI and core CPI rising 0.2 percent in June.

The Fed tracks a different inflation measure, which hit the U.S. central bank’s 2 percent target in May for the first time in six years. Economists expect the personal consumption expenditures (PCE) price index excluding food and energy will overshoot its target.

U.S. financial markets were little moved by the data.

In another report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 18,000 to a seasonally adjusted 214,000 for the week ended July 7, the lowest level since early May.

That suggests robust labor market conditions prevailed in early July. The economy created 213,000 jobs in June.

A tightening labor market and rising raw material costs are expected to push up inflation through next year. Manufacturers are facing rising input costs, in part because of tariffs imposed by the Trump administration on lumber, aluminum and steel imports.

So far, they have not passed on those higher costs to consumers. Fed officials have indicated they would not be too concerned with inflation overshooting its target.

Last month, gasoline prices rose 0.5 percent after increasing 1.7 percent in May. Food prices gained 0.2 percent, with food consumed at home rebounding 0.2 percent after falling 0.2 percent in May. Food prices were unchanged in May.

Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 percent last month after increasing by the same margin in May. But the cost of hotel accommodation fell 3.7 percent after rising 2.9 percent in May.

Healthcare costs advanced 0.4 percent, with the price of hospital services surging 0.8 percent. Healthcare prices gained 0.2 percent in May. Consumers also paid more for prescription medication last month.

Prices for new motor vehicles rose for a second straight month. There were also increases in the cost of communication, motor vehicle insurance, education and alcoholic beverages.

But apparel prices fell 0.9 percent after being unchanged in May. The cost of airline tickets declined for a third straight month. Prices of household furnishings and tobacco also fell last month.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. jobless claims rise; continuing claims lowest since 1973

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/File Photo

WASHINGTON (Reuters) – New applications for U.S. unemployment benefits increased more than expected last week, but the number of Americans on jobless rolls fell to its lowest level since 1973, pointing to tightening labor market conditions.

Initial claims for state unemployment benefits rose 24,000 to a seasonally adjusted 242,000 for the week ended March 31, the Labor Department said on Thursday. Data for the prior week were revised to show 3,000 more claims received than previously reported.

Economists polled by Reuters had forecast claims rising to 225,000 in the latest week. Last week’s increase likely reflected difficulties adjusting the data around moving holidays like Easter and school spring breaks.

The labor market is considered to be near or at full employment. The jobless rate is at a 17-year low of 4.1 percent, not too far from the Federal Reserve’s forecast of 3.8 percent by the end of this year.

The Labor Department said claims for Maine and Colorado were estimated last week. It also said claims-taking procedures in Puerto Rico and the Virgin Islands had still not returned to normal after the territories were devastated by Hurricanes Irma and Maria last year.

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, rose 3,000 to 228,250 last week.

The claims data has no bearing on March’s employment report, which is scheduled for release on Friday. According to a Reuters survey of economists, nonfarm payrolls probably increased by 193,000 jobs in March. The unemployment rate is forecast falling one-tenth of a percentage point to 4.0 percent.

Economists are optimistic that tightening labor market conditions will start boosting wage growth in the second half of this year. That should help to support consumer spending, which slowed at the start of the year.

The claims report also showed the number of people receiving benefits after an initial week of aid fell 64,000 to 1.81 million in the week ended March 24, the lowest level since December 1973. The four-week moving average of the so-called continuing claims dropped 13,500 to 1.85 million, the lowest reading since January 1974.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci) ((Lucia.Mutikani@thomsonreuters.com; 1 202 898 8315; Reuters Messaging: lucia.mutikani.thomsonreuters.com@reuters.net)