U.S. jobs market firming; inflation pressures easing

By Lucia Mutikani

WASHINGTON (Reuters) - The number of Americans filing for unemployment benefits fell more than expected last week, pointing to shrinking labor market slack that could allow the Federal Reserve to raise interest rates again this year despite moderate inflation growth.

Inflation is unlikely to pick up any time soon as other data on Thursday showed import prices recorded their biggest drop in 15 months in May. The Fed on Wednesday raised interest rates for the second time this year, saying it expected economic activity to expand at a moderate pace and labor market conditions to strengthen somewhat further.

 

Initial claims for state unemployment benefits dropped 8,000 to a seasonally adjusted 237,000 for the week ended June 10, the Labor Department said on Thursday. Economists had forecast first-time applications for jobless benefits falling to 242,000 in the latest week.

Claims have now been below 300,000, a threshold associated

with a healthy labor market, for 119 straight weeks. That is the

longest such stretch since 1970, when the labor market was

smaller. The labor market is near full employment, with the

jobless rate at a 16-year low of 4.3 percent.

While monthly job growth has slowed, record high job openings suggest that is likely because companies cannot find qualified workers. The number of people still receiving benefits after an initial week of aid increased 6,000 to 1.94 million in the week ended June 3.

The so-called continuing claims have now been below 2 million for nine straight weeks, pointing to diminishing labor market slack.

The dollar rose slightly on the data, while prices for U.S. Treasuries fell. U.S. stock index futures were trading lower.

In another report, the Labor Department said import prices declined 0.3 percent last month as the cost of imported petroleum products tumbled. That was the biggest drop since February 2016 and followed a 0.2 percent increase in April.

In the 12 months through May, import prices rose 2.1 percent, the smallest gain since last December. Import prices rose 3.6 percent year-on-year in April.

The slowdown in import prices suggests domestic inflation measures could remain soft for a while.

Data on Wednesday showed an unexpected drop in consumer prices in May, leading to the smallest year-on-year increase in the consumer price index in six months. The U.S. central bank has acknowledged the recent retreat in price pressures, which has pushed inflation well below the Fed's 2 percent target.

The Fed said it expected annual inflation rates to remain somewhat below 2 percent in the near term but to stabilize around the target over the medium term.

In May, prices for imported petroleum tumbled 3.9 percent, the biggest drop since last August, after falling 0.4 percent the prior month. Import prices excluding petroleum were unchanged after increasing 0.3 percent in April.

Import prices excluding petroleum increased 1.0 percent in the 12 months through May. Prices for imported capital goods were unchanged for a second straight month.

Imported motor vehicle prices edged up 0.1 percent, while the cost of imported food jumped 1.2 percent.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)