THE NUMBER of US workers filing new claims for jobless aid fell last week and factory activity in March hit its highest level in more than five-and-a-half years, strengthening hopes for a self-sustaining recovery.
The data came a day before the release of the government’s closely watched employment report for March. It is expected to show nonfarm payrolls grew only for the second time since the economy fell into recession in December 2007.
Manufacturing has led the economy out of its deepest recession since the 1930s, but the labour market has lagged. Job growth is essential to maintain an expansion when the impetus from a rebuilding of inventories disappears later this year.
“The data suggest that the economic recovery is reaching a self-sustaining stage, which means it’s less prone to setbacks. If we wait a couple more months we are going to find that this recovery is very robust,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
Initial claims for state unemployment benefits slipped 6,000 to 439,000 in the week ended March 27th, the Labor Department said.
The data, which mirrored market expectations, offered few clear hints on today’s job figures because it covered a week outside the survey period for the March employment report.
Chris Low, chief economist at FTN Financial in New York, said the data suggested the Federal Reserve would likely need to start bumping interest rates higher late in the year. “This is the kind of strength in manufacturing consistent with economic growth strong enough to create enough jobs to allow the Fed to raise rates in the fourth quarter if it continues,” Mr Low said.
US benchmark interest rates are near zero and the central bank has pledged to keep them ultra low while it monitors the strength of the recovery.
Treasury secretary Timothy Geithner told NBC's Todayshow yesterday that while the economy was going to start creating jobs again, the unemployment rate would remain high for some time. It has held at 9.7 per cent for two months.
