The number of people in the United States filing for benefits from unemployment compensation dropped more than had been expected last week. The figure hit its lowest level in five months, which pointed to the sustained strength in the U.S. labor market that will likely end fears of a pending recession.
The initial claims for benefits of state unemployment were lower by 18,000 to an adjusted seasonal rate of 259,000 for the March 5 ending week. This is the lowest it has been since the middle of October, said the Department of Labor Thursday.
Jobless claims have been watched closely for any signs that the labor market has weakness following the recent massive sell off in the stock market that caused the financial market conditions to tighten, amidst the slowing growth of the global economy and the fears that the economy in the U.S. was headed toward a recession.
Thus far, the U.S. jobs market is on strong footing, with payrolls, excluding farms, increasing in February by over 242,000, while the rate of unemployment held at 4.9% a low of eight years.
The fears of a recession have been soothed as well by the strong consumer spending to begin the new year along with signs that the troubled manufacturing industry was stabilizing.
Firming inflation and a labor market tightening could see the U.S. Federal Reserve gradually increase the interest rates during the year. The central bank in the U.S. hiked its overnight, benchmark interest rates back during December for the first time in close to 10 years.
However, must observers do not believe the Fed will raise its borrowing costs at its next meeting, which is next week.
Stocks were little changed following the news. The market opened up, following the decision by the European Central Bank to lower its key rate and expand its stimulus program in an attempt to stimulate euro zone growth.
Economists forecasted claims dropping last week to 275,000. Claims have stayed below the threshold of 300,000 for a year. That threshold is associated with being a healthy labor market.