The number of Americans filing for unemployment benefits unexpectedly rose last week to the highest level in more than a year, raising further concerns about the health of the labor market in the wake of a slowdown in job gains in April.
Other data on Thursday showed import prices increased in April for a second straight month, suggesting that the disinflationary impulse from a strong dollar and lower oil prices, which has helped to hold inflation well below the Federal Reserve's 2% target, was fading.
Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 294,000 for the week ended May 7, the highest level since late February 2015, the Labor Department said. Economists polled by Reuters had forecast initial claims slipping to 270,000 in the latest week.
"Jobless claims have moved sharply higher in recent weeks, reinforcing concerns that labor market conditions have softened in response to the slowdown in the economy in recent months," said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.
There was a surge last week in unadjusted jobless claims in New York state, likely as some striking Verizon workers filed for unemployment benefits. Unadjusted claims also rose in Pennsylvania and Michigan.
Despite the jump last week, claims have remained below 300,000, a threshold associated with healthy job market conditions, for 62 consecutive weeks, the longest stretch since 1973. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, increased 10,250 to 268,250 last week, the highest level in almost three months.
The claims report came on the heels of data last week showing nonfarm payrolls increased only 160,000 in April, the smallest gain in seven months, after advancing by 208,000 in March. The signs of labor market weakness suggest the Fed is unlikely to raise interest rates before the end of the year.
The U.S. central bank raised its benchmark overnight interest rate in December for the first time in nearly a decade.
The dollar trimmed gains versus the yen and euro after the report. U.S. stock index futures also pared gains, while prices for U.S. government bonds were trading lower.
The labor market has been fairly robust despite a sharp slowdown in economic growth in the first quarter.
The spike in jobless claims and moderation in employment gains likely do not suggest a deterioration given difficulties adjusting the data for seasonal fluctuations. The almost one-month long Verizon strike may also be boosting claims.
A report on Tuesday showed job openings hit an eight-month high in March, with the rate re-testing its post-recession high. Thursday's claims report showed the number of people still receiving benefits after an initial week of aid rose 37,000 to 2.16 million in the week ended April 30. The four-week average of the so-called continuing claims fell 3,750 to 2.14 million, the lowest reading since November 2000.
In a second report, the Labor Department said import prices increased 0.3% last month after a similar gain in March. The rise last month reflected a pick-up in oil prices and the dollar's depreciation.
Prices for imported goods were down 5.7% in the 12 months through April, reflecting the lingering effects of the dollar's sharp rally and the oil price plunge between June 2014 and December 2015.
The dollar has this year weakened 2.5% against the currencies of the United States' main trading partners. The greenback gained 20% on a trade-weighted basis between June 2014 and December 2015. At the same time, oil prices have pushed off multi-year lows.