Jobless claims fall, weather clouds factory picture

WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits fell last week, pointing to steadily improving labor market conditions, despite two straight months of weak hiring.

Other data on Thursday showed relentlessly cold weather putting a strain on household budgets, with electricity and heating fuel prices surging in January. However, inflation pressures remained subdued.

Freezing temperatures likely contributed to a surprise fall in factory activity in the mid-Atlantic region this month.

Initial claims for state unemployment benefits declined 3,000 to a seasonally adjusted 336,000, the Labor Department said. That was mostly in line with economists' expectations.

The claims data covered the survey week for February's nonfarm payrolls report. Snow storms slammed parts of the country last week, which could have kept some workers at home.

"February's survey reference week coincided with storms pummeling the Eastern Seaboard of the United States. This would suggest a deleterious impact on February's payroll numbers," said Guy Berger, an economist at RBS in Stamford, Connecticut.

Bitterly cold weather was blamed for a sharp slowdown in hiring in December and January's marginal bounce back. But claims have been tucked in a 325,000-348,000 range this year suggesting no fundamental shift in labor market conditions.

In a second report, the department said strong gains in the price of household energy had accounted for most of the 0.1 percent rise in its Consumer Price Index in January.

The CPI had advanced 0.2 percent in December and last month's rise was in line with economists' expectations.

In January, electricity prices rose 1.8 percent, the largest gain since March 2010. Natural gas prices surged 3.6 percent. That was the largest rise since April. The cost of heating oil jumped 3.7 percent, the biggest increase since September 2012.

The increases, which offset a 1.0 percent fall in the price of gasoline, is putting a strain on household finances as incomes barely grow. Weekly average earnings adjusted for inflation rose 0.1 percent in January after sliding 0.5 percent in December, the department said in a third report.

"Higher energy prices could take a toll on consumer spending this winter," said Jay Morelock, an economist at FTN Financial in New York. "Inflation remains muted throughout most of the economy. The jump in energy prices should subside once shortages of fuel oil and propane are alleviated."

U.S. stocks were trading marginally higher, while prices for U.S. Treasury debt fell. The dollar firmed against a basket of currencies.

MIXED SIGNALS ON FACTORY ACTIVITY

Separately, the Philadelphia Federal Reserve Bank said its business activity index tumbled to -6.3 this month from 9.4 in January. Economists had expected the gauge of factory activity in eastern Pennsylvania, southern New Jersey and Delaware to come in at 8.0.

A reading above zero indicates expansion in the region's manufacturing. New orders fell to -5.2 from 5.1. Growth in the employment component decelerated, with the index down to 4.8 from 10.0.

But survey respondents' view on the coming months improved, with the gauge of business conditions for the next six months rising to 40.2 from 34.4.

"We suspect that a large portion of the weakness can be attributable to adverse weather conditions," said Gennadiy Goldberg, an economist at TD Securities in New York.

A survey of national factory activity showed manufacturing activity accelerated in February at its fastest pace in nearly four years due in part to growth in new orders.

Financial data firm Markit said its "flash" or preliminary U.S. Manufacturing Purchasing Managers Index rose to 56.7 in February, its highest since May 2010, compared to 53.7 in the final reading for January. Readings above 50 indicate expansion.

"This suggests that the regional Fed indicators may be overstating the extent of manufacturing weakness during the month," said Goldberg

Consumer prices advanced 1.6 percent in the 12 months to January, after increasing 1.5 percent in December.

Stripping out the volatile energy and food components, the so-called core CPI also rose 0.1 percent in January for a second straight month. In the 12 months to January, core CPI rose 1.6 percent, slowing from a 1.7 percent increase in December and the smallest rise since June.

With consumer inflation continuing to run below the Federal Reserve's 2 percent target, monetary policy is likely to remain accommodative for a while even as the U.S. central bank reduces the amount of money it is injecting into the economy each month.

Within the core CPI, there were increases in rents, medical care costs and prescription drugs. Tobacco prices recorded their largest gain since July. These tend to rise at the beginning of the year because of tax hikes.

Elsewhere, there were declines in the prices of new motor vehicles, used cars and trucks, and apparel. Airline fares dropped 2.2 percent.

(Reporting by Lucia Mutikani; additional reporting by Rodrigo Campos; Editing by Andrea Ricci)

WhatsAppFacebookTwitterLinkedinBeloudBluesky