The number of Americans filing new claims for jobless benefits tumbled to a 15-year low last week and consumer spending rose in March, signs the economy was regaining momentum after stumbling badly in the first quarter.
The economic outlook was brightened further by another report on Thursday showing a solid increase in wages in the first quarter, which should keep the Federal Reserve on track to raise interest rates this year.
Initial claims for state unemployment benefits fell 34,000 to a seasonally adjusted 262,000 for the week ended April 25, the lowest reading since April 2000, the Labor Department said.
It was the eighth straight week that claims remained below 300,000, which is usually associated with a strengthening labor market, suggesting March’s moderation in job growth was likely an aberration.
Economists polled by Reuters had forecast claims falling to 290,000 last week. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 1,250 last week to 283,750.
U.S. stock index futures briefly pared losses after the data, while prices for U.S. government debt fell. The dollar was largely unchanged against a basket of currencies.
Separately, the Commerce Department said consumer spending rose 0.4 percent last month as households stepped up purchases of big-ticket items like automobiles.
The increase followed a 0.2 percent gain in February and indicated that consumer spending picked up momentum at the end of the first quarter, which bodes well for consumption in the April-June period.
While that should boost growth in the second quarter, the rebound in economic activity will likely be curbed by an inventory overhang, a strong dollar and cuts in energy sector investment.
Economists polled by Reuters had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, increasing 0.5 percent last month.
When adjusted for inflation, consumer spending rose 0.3 percent in March after being flat in the prior month.
The economy slowed to a crawl in the first quarter as it struggled with severe winter weather, a now-settled labor dispute at normally busy West Coast ports, a strong dollar and lower energy prices, which have cut into domestic oil production.
The Fed on Wednesday acknowledged the first quarter’s sharp growth moderation, but dismissed it as partly the result of transitory factors.
Spending last month picked up despite personal income being flat. But the income weakness will likely be temporary as the labor market gradually tightens.
In a third report, the Labor Department said the Employment Cost Index, the broadest measure of labor costs, advanced 0.7 percent – the largest gain since the third quarter of 2014 – after an unrevised 0.5 percent rise in the fourth quarter.
The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack.
Wages and salaries, which account for 70 percent of employment costs, rose 0.7 percent in the first quarter. They had increased 0.6 percent in the fourth quarter.
Private sector wages and salaries increased 0.7 percent, the largest rise since the third quarter of 2014, after gaining 0.5 percent in the prior quarter.
In the 12 months through March, labor costs jumped 2.6 percent, the largest rise since the fourth quarter of 2008. That is still below the 3 percent threshold that economists say is needed to bring inflation closer to the Fed’s 2 percent target. Labor costs increased 2.2 percent in the 12 months through December. Private sector wages and salaries were up 2.8 percent in the 12 months through March, the biggest gain since the third quarter of 2008, after rising 2.2 percent in the 12 months through December.
(Reporting by Lucia Mutikani; Editing by Paul Simao)