U.S. Labor Market Tightens As Jobless Claims Sink To Lowest Level Since 1969

The number of Americans filing new claims for jobless benefits dropped to a 52-1/2-year low of 187,000 last week, while unemployment rolls continued to shrink, pointing to diminishing labor market slack that will keep boosting wage inflation, Lucia Mukitani reported for Reuters.

Photo Insert: Last week's drop in jobless claims was widespread, with large decreases in California, Michigan, Kentucky, and Illinois.

The strength in the job market reported by the Labor Department on Thursday, Mar. 24, may push the Federal Reserve to raise interest rates by half a percentage point at its next policy meeting in May.

Fed Chair Jerome Powell on Monday said the US central bank must move "expeditiously" to raise rates and possibly "more aggressively" to keep high inflation from becoming entrenched. The Fed last week increased its policy interest rate by 25 basis points, the first hike in more than three years.

"US businesses are not laying off workers because they know the enormous challenges they're facing in filling open positions," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania. "If initial claims remain below 200,000 for a period of time, it will raise a red flag with the Fed."

Initial claims for state unemployment benefits fell 28,000 to a seasonally adjusted 187,000 for the week ended March 19, the lowest level since September 1969.

Economists polled by Reuters had forecast 212,000 applications for the latest week. Last week's drop in claims was widespread, with large decreases in California, Michigan, Kentucky, and Illinois.

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