US jobless claims cast cloud on labour market

The number of Americans filing for jobless aid hit a two-month high last week and more applications were received in the prior week than initially reported, suggesting a cooling in the labour market recovery. Initial claims for state unemployment benefits increased 13,000 last week to a seasonally adjusted 380,000, the Labour Department said on Thursday, defying economists' expectations for a drop to 355,000.
The prior week's count was revised to show 10,000 more applications than previously reported. While economists cautioned against reading too much into the report, saying problems adjusting the data for seasonal fluctuations around Easter may have pushed last week's figure higher, they said it nonetheless provided a worrying signal.
"It certainly bolsters the view that things are starting to slow down," said Tim Quinlan, an economist at Wells Fargo Securities in Charlotte, North Carolina.
The data comes in the wake of a report on Friday that showed the economy created only 120,000 jobs last month, the fewest since October. The unemployment rate fell to a three-year low of 8.2 percent, but largely as people gave up the search for work.
Economists noted that initial claims tend to be volatile at this time of year due to shifts in the timing of Easter and school spring breaks, making it difficult for the Labour Department to adjust the data for seasonal variations.
Claims have risen in nine of the last 11 Easter holiday weeks and have over the past year tended to increase in the first full week of a quarter.
"We're also getting some payback for a mild winter. Mild temperatures kept construction workers on the payrolls and that is causing some issues with the seasonal adjustment as well," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester Pennsylvania.
"The increase caught our attention, but the next few weeks will be very telling. If claims continue to tick higher then it will be a signal that the sword over the jobs market is real. For now we take this report with a grain of salt."
The four-week moving average for new claims, considered a better measure of labour market trends, rose moderately.
A report from the Commerce Department showed the nation's trade gap shrank 12.4 percent to $46 billion in February as exports hit a record high. It was the biggest month-to-month decline in the trade shortfall since May 2009.
The shrinking of the deficit prompted economists, including those at Goldman Sachs, to lift their estimates for first quarter economic growth. Goldman Sachs now see US gross domestic product expanding at a 2.5 percent annual pace instead of 2.3 percent estimated before.
The economy grew at a 3 percent rate in the fourth quarter. A third report showed little sign of inflation pressures. The Labour Department said prices received by US producers were unchanged in March after advancing 0.4 percent in February, while wholesale prices excluding volatile food and energy costs rose 0.3 percent.
That should allow the Federal Reserve to keep interest rates ultra low and even embark on a third round of asset purchases or quantitative easing should job growth completely stall.
New York Federal Reserve Bank President William Dudley said on Thursday the US central bank was gathering more data to determine whether last month's weak employment report was just a weather-related setback or a sign the recovery is losing momentum again.
In the 12 months through March, wholesale prices increased 2.8 percent, the smallest increase since June 2010, after advancing 3.3 percent in February.