US jobless claims rise; labor market still tightening

Economic Indicators Reuters

People search for jobs on computers at the Verdugo Jobs Center, a partnership with the California Employment Development Department, in Glendale, California November 7, 2008. The U.S. unemployment rate shot to a 14-1/2 year high last month as ... employers slashed jobs by an unexpectedly steep 240,000, suggesting President-elect Barack Obama will face a deep recession when he takes office. REUTERS/Fred Prouser (UNITED STATES) - RTXADF8

The number of Americans filing for unemployment benefits unexpectedly rose last week, but the underlying trend remained consistent with a tightening labor market.

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Initial claims for state unemployment benefits increased 3,000 to a seasonally adjusted 244,000 for the week ended Aug. 5, the Labor Department said on Thursday.

Data for the prior week was revised to show 1,000 more applications received than previously reported.

Economists polled by Reuters had forecast claims would be unchanged at 240,000 in the latest week. With the labor market near full employment, there is probably limited room for claims to continue declining.

Claims have now been below 300,000, a threshold associated with a healthy labor market, for 127 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller. The unemployment rate is 4.3 percent.

Labor market tightness could encourage the Federal Reserve to announce a plan to start unwinding its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities at its policy meeting next month.

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A Labor Department official said there were no special factors influencing the claims data and that no states had been estimated.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 1,000 to 241,000 last week, the lowest level since May.

The government reported last week that nonfarm payrolls increased by 209,000 jobs in July. The economy has added 1.29 million jobs this year. That has resulted in the unemployment rate dropping five-tenths of a percentage point.

Thursday's claims report also showed the number of people still receiving benefits after an initial week of aid fell by 16,000 to 1.95 million in the week ended July 29. The so-called continuing claims have now been below the 2 million mark for 17 straight weeks, pointing to diminishing labor market slack.

The four-week moving average of continuing claims edged up 500 to 1.97 million, still remaining below the 2 million mark for the 15th consecutive week. (Reporting by Lucia Mutikani; Editing by Paul Simao)

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