The number of Americans filing for unemployment benefits rose slightly last week but the four-week average of such claims, considered a better gauge, fell to a 43-1/2-year low in a sign of a strengthening labour market. Other data on Thursday showed house prices increasing solidly in December amid strong demand for housing even as mortgage rates rose. The reports highlighted strength in the economy that could allow the Federal Reserve to raise interest rates in the near-term.
"All indications are that job creation remains solid, underscoring the resiliency of the nearly eight-year economic recovery," said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan. "A March (rate) hike cannot be ruled out."
Initial claims for state unemployment benefits increased 6,000 to a seasonally adjusted 244,000 for the week ended Feb. 18, the Labour Department said. It was the 103th straight week that claims remained below 300,000, a threshold associated with a healthy labour market. That is the longest stretch since 1970, when the labour market was much smaller. The labour market is at or close to full employment, with the unemployment rate at 4.8 percent.
Economists had forecast new claims for unemployment benefits rising to 241,000 in the latest week. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 4,000 to 241,000 last week, the lowest reading since July 1973.
Last week's claims report covered the survey period for the Labour Department's nonfarm payrolls data for February. The four-week average of claims fell 6,500 between the January and February payrolls survey weeks. This suggests another month of strong job gains after payrolls increased 227,000 in January. The tightening labour market is helping to underpin demand for housing. In a report on Thursday, the Federal Housing Finance Agency (FHFA) said its house price index rose a seasonally adjusted 6.2 percent in December from a year ago.
That followed a 6.1 percent gain in November. The FHFA's index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac. The higher home prices largely reflect tight housing inventories against the backdrop of strong demand.
This is despite the 30-year fixed mortgage rate rising more than 50 basis points since November to above 4.0 percent. But with the home price increases outpacing wage growth, economists expect demand for housing to slow this year.