U.S. labor market strength intact, manufacturing regaining footing

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits unexpectedly rose last week, but a sharp drop in layoffs in March suggested the labor market momentum remained intact.

Labor market strength, however, has not been accompanied by robust wage growth, making it unlikely the Federal Reserve will raise interest rates soon. The U.S. central bank is also keeping a cautious eye on international developments.

Initial claims for state unemployment benefits increased 11,000 to a seasonally adjusted 276,000 for the week ended March26, the Labor Department said on Thursday. Economists had forecast claims remaining unchanged at 265,000 in the latest week.

“Claims remain at a level that is consistent with low rates of involuntary job separation and this report, similar to other labor market-related releases for March, points to no significant shift in labor market trends at the end of the first quarter,” said John Ryding, chief economist at RDQ Economics in New York.

Applications for unemployment benefits have now been below 300,000, a threshold associated with healthy labor market conditions, for 56 weeks, the longest stretch since 1973. With the labor market continuing to tighten, there is probably little scope for significant further declines in claims.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 3,500 to 263,250 last week.

In a separate report, global outplacement consultancy Challenger, Gray & Christmas said U.S.-based employers announced 48,207 jobs cuts this month, down 21.7 percent from February.

“Job cuts have slowed since surging in the first two months of the year,” said John Challenger, chief executive officer of Challenger, Gray & Christmas.

U.S. Treasury prices rose, while the dollar fell against a basket of currencies. U.S. stocks were trading higher.


The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade.

Fed Chair Janet Yellen said on Tuesday slowing global growth and lower oil prices posed a downside risk to the domestic economic outlook, adding that she considered it appropriate for policymakers to “proceed cautiously in adjusting policy.” The claims data has no bearing on Friday’s employment report for March, as it falls outside the survey period. Claims were low last month, suggesting job growth remained solid.

According to a Reuters survey of economists, nonfarm payrolls probably increased by 205,000 this month after rising by 242,000 in February. The unemployment rate is forecast unchanged at an eight-year low of 4.9 percent.

The jobs market also got a boost from a third report from the Institute for Supply Management-Chicago, showing factory employment in the Midwest region jumped to a near one-year high in March.

The ISM-Chicago’s regional manufacturing index surged 6 points to a reading of 53.6 this month also as production, new orders and order backlogs increased.

A reading above 50 indicates expansion in the region’s factory activity. The strong increase in the ISM-Chicago index was the latest indication that the worst of the manufacturing rout was probably over.

“The boost to new orders signals growth will continue in the coming months.┬áThe bottom in manufacturing may be behind us,” said Jay Morelock, an economist at FTN Financial in New York.

Manufacturing, which accounts for about 12 percent of the U.S. economy, has been hammered by a robust dollar, spending cuts in the energy sector as lower oil prices undercut profits, and weak global demand. Efforts by businesses to reduce an inventory overhang have also been a drag.

(Reporting by Lucia Mutikani; Editing by Paul Simao and Meredith Mazzilli)


Wall Street little changed at the open

(Reuters) – U.S. stocks were little changed at the open on Thursday, the last day of a turbulent quarter for financial markets.

While weekly jobless claims were slightly higher than expected, investors are awaiting the critical non-farm payrolls report on Friday that will give a clearer reading on the state of the economy.

The Dow Jones industrial average <.DJI> rose 5.28 points, or 0.03 percent, to 17,721.94, the S&P 500 <.SPX> lost 0.41 points, or 0.02 percent, to 2,063.54 and the Nasdaq composite <.IXIC> dropped 0.95 points, or 0.02 percent, to 4,868.35.

(Reporting by Tanya Agrawal)


Shares, bonds rally, dollar off as Yellen strikes cautious pose

By Wayne Cole

SYDNEY (Reuters) – Asian shares rallied on Wednesday as markets scaled back expectations for how fast and how far U.S. interest rates might rise this year, bruising the dollar and boosting sovereign bonds.

MSCI’s broadest index of Asia-Pacific shares outside Japan reversed four sessions of losses to jump 1.3 percent. South Korea <.KS11> hit its highest for the year so far, while Shanghai <.SSEC> bounced 1.4 percent.

Japan’s Nikkei <.N225> was the only loser as a rise in the yen against the dollar nudged the index down 0.3 percent.

The sea change came after Federal Reserve Chair Janet Yellen emphasised global dangers to growth and inflation, and thus the need to proceed “cautiously” on tightening policy.

“Her comments stand somewhat in contrast to recent remarks by other FOMC members and are more clear in respect to downside risk factors,” said Michael Gapen, chief U.S. economist at Barclays.

“Hence, we see the comments as an effort to exert control over the message and, in doing so, tilt expectations for policy rate hikes in a decidedly dovish direction.”

Debt markets rallied hard in response with yields on 10-year U.S. paper dropping 7 basis points to one-month low of 1.80 percent.

Fed fund futures <0#FF:> jumped as investors priced out any a chance of a hike in April and only a slim probability of a move in June. The December contract implies a rate of just 57 basis points compared to the current 37 basis points.

On Wall Street, technology shares led gains in major indexes and both the S&P 500 and Dow closed at their highs for 2016. The Dow <.DJI> rose 0.56 percent, while the S&P 500 <.SPX> gained 0.88 percent and the Nasdaq <.IXIC> 1.67 percent.

Dollar bulls were not so pleased and the U.S. currency fell across the board. The dollar index <.DXY> was down at 95.168, having suffered its biggest one-day fall in nearly two weeks.

The greenback dipped to 112.51 yen <JPY=> and away from a two-week high of 113.80. It also lost ground on the euro to $1.1292 <EUR=>, nearing the March peak of $1.1342.

Commodity currencies gained with the Australian dollar back above 76 U.S. cents <AUD=D4> and not far off a recent 8-1/2 month peak of $0.7681.

The drop in the U.S. dollar helped oil prices regain a little ground, as did a forecast that U.S. stockpiles may have grown by less than first thought.

U.S. crude <CLc1> added 40 cents to $38.68 a barrel, after falling around 3 percent on Tuesday. Brent <LCOc1> rose 31 cents to $39.45. [O/R]

Gold <XAU=> was up at $1,237 an ounce, after rising almost 2 percent overnight.

(Reporting by Wayne Cole; Editing by Shri Navaratnam and Eric Meijer)