WASHINGTON (Reuters) - New applications for U.S. unemployment benefits dropped last week and the number of Americans on jobless rolls fell back to levels last seen in 1973, suggesting a further tightening in labor market conditions.
The labor market strength was also underscored by another report on Thursday from the Philadelphia Federal Reserve showing manufacturers in the mid-Atlantic region boosting employment and increasing hours for workers in October.
That, together with a robust economy likely keep the Federal Reserve on course to increase interest rates again in December. The U.S. central bank raised rates in September for the third time this year and removed the reference to monetary policy remaining “accommodative.”
“The labor market is tight by any quantitative metric and companies are holding on to labor because of the difficulty of replacing workers,” said John Ryding, chief economist at RDQ Economics in New York.
Initial claims for state unemployment benefits decreased 5,000 to a seasonally adjusted 210,000 for the week ended Oct. 13, the Labor Department said. Claims fell to 202,000 during the week ended Sept. 15, which was the lowest level since November 1969.
Economists polled by Reuters had forecast claims slipping to 212,000 in the latest week. The Labor Department said claims for South and North Carolina continued to be affected by Hurricane Florence, which drenched the region in mid-September. Claims for Florida were impacted by Hurricane Michael.
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 2,000 to 211,750 last week.
The claims data covered the survey period for the nonfarm payrolls component of October’s employment report. While the four-week moving average of claims rose 5,750 between the September and October survey periods, that did not change expectations for a rebound in job growth this month after Florence depressed restaurant and retail payrolls in September.
“We think that job growth could bounce back in October if the weakness from the September report that was tied to Hurricane Florence reverses,” said Daniel Silver, an economist at JPMorgan in New York.
The economy created 134,000 jobs in September, the fewest in a year. The labor market is viewed as being near or at full employment with the unemployment rate close to a 49-year low of 3.7 percent. There are a record 7.14 million open jobs.
Minutes of the Fed’s Sept. 25-26 meeting published on Wednesday showed policymakers “generally agreed that (labor market) conditions continued to strengthen,” and united on the need to raise interest rates further.
The dollar firmed against a basket of currencies and U.S. Treasury yields rose marginally. Stocks on Wall Street were trading lower, also weighed down by a raft of weak earnings reports from industrial companies.
Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid fell 13,000 to 1.64 million for the week ended Oct. 6, the lowest level since August 1973. The four-week moving average of the so-called continuing claims dipped 1,250 to 1.65 million, also the lowest level since August 1973.
In a separate report, the Philadelphia Fed said employment at factories in the region - which covers eastern Pennsylvania, southern New Jersey, and Delaware - increased in October. It said more than 30 percent of responding firms reported increasing payrolls this month.
The Philadelphia Fed’s employment index rose 2 points to a reading of 19.5 this month and firms also reported increasing hours for workers. The workweek index jumped to a reading of 20.8 from 14.6 in September.
The survey’s business conditions index slipped to a reading of 22.2 in October from 22.9 in September amid a drop in new orders. But firms were upbeat about new orders over the next six months and many expected to increase capital spending in 2019.
Businesses also reported raising prices for their goods, with the survey’s prices received index rising 4.5 points in October to a reading of 24.1. Further prices increases are expected over the next six months.
While more companies reported paying more for raw materials this month, the survey’s prices paid index slipped 1.4 points to a reading of 38.2. The prices paid index had dropped 15 points in September. The survey’s findings suggest inflation could push higher over the coming months.
“Firms’ pricing power is likely to grow and inflation is likely to accelerate,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
Reporting by Lucia Mutikani; Editing by Andrea Ricci