Weekly Jobless Claims Tumble; Inflation Ticks Up

Before you go, we thought you'd like these...
Consumer Prices
Tony Dejak/AP
By Lucia Mutikani

WASHINGTON -- New applications for U.S. unemployment benefits hit a seven-year low last week while consumer prices recorded their largest increase in 10 months in April, pointing to a firming economy.

The economy's outlook was further brightened Thursday by other data showing factory activity in New York state expanding at its quickest pace in nearly four years in May.

"It conveys the message of solid economic activity. Labor conditions continue to improve and I expect this will be validated by payroll reports over the next few months," said Anthony Karydakis, chief economic strategist at Miller Tabak in New York.

%VIRTUAL-article-sponsoredlinks%Initial claims for state unemployment benefits declined 24,000 to a seasonally adjusted 297,000, the Labor Department said, offering fresh evidence the jobs market was strengthening.

That was the lowest reading since May 2007 and brought claims back to their pre-recession level. Economists had forecast first-time applications ticking up to 320,000 last week.

In a second report, the department said its consumer price index increased 0.3 percent last month as food prices rose for a fourth consecutive month and the cost of gasoline surged.

The rise in the CPI was the biggest rise since June last year and added to March's 0.2 percent rise.

The combination of a strengthening jobs market and an uptick in inflation pressures should give the Federal Reserve ammunition to continue scaling back its monetary stimulus.

However, the U.S. central bank isn't expected to start raising overnight interest rates, currently near zero, before the second half of 2015.

The dollar rose against the euro and the yen on the reports, while prices for U.S. government debt fell. U.S. stock index futures trimmed losses.

Inflation Stirring

In the 12 months through April, consumer prices rose 2 percent after gaining 1.5 percent in March. The increase was the biggest since July last year and in part reflected prices coming off last year's low base when energy costs decreased.

Economists had forecast the CPI increasing 0.3 percent from March and gaining 2 percent from a year ago.

Stripping out food and energy prices, the so-called core CPI rose 0.2 percent after advancing by the same margin in March.

In the 12 months through April, the core CPI increased 1.8 percent. That was the biggest gain since August last year and followed a 1.7 percent rise in March.

Economists had forecast the core CPI rising only 0.1 percent from March and 1.7 percent from a year-ago.

The Fed targets 2 percent inflation and it tracks an index that is running even lower than the CPI. Policymakers worry that inflation is running too low, but the steady increase in prices should ease those concerns.

Claims had been volatile in recent weeks because of difficulties adjusting the data during the Easter and Passover holidays and school spring breaks, which fall on different calendar days every year.

The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, fell 2,000 to 323,250.

The labor market is strengthening after wobbling in December and January because of an icy-cold winter. Nonfarm payrolls increased 288,000 in April and economists expect job gains to average 200,000 for the rest of the year.

That should stimulate demand and boost economic growth.

The claims report showed the number of people still receiving benefits after an initial week of fell 9,000 to 2.67 million in the week ended May 3, the lowest since December 2007.

Separately, the New York Federal Reserve said its "Empire State" general business conditions index jumped to 19.01 this month, the strongest reading since June 2010. It was at 1.29 in April.

Readings above zero indicate growth. New orders surged after contracting in April and inventories also increased, as did shipments.

-Additional reporting by Richard Leong in New York.

Weekly Jobless Claims Tumble; Inflation Ticks Up
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION
Read Full Story

People are Reading

The Latest from our Partners
1 - 3 of 15