Fears of US stalling labour market


The number of Americans filing for jobless aid rose last week to the highest level since January, a development that could raise fears the labour market recovery was stalling after job creation slowed in March.

Initial claims for state unemployment benefits increased 13,000 to a seasonally adjusted 380,000, the Labor Department said today, defying economists' expectations for a drop to 355,000.

The four-week moving average for new claims, considered a better measure of labour market trends, rose 4,250 to 368,500.

Some economists blamed the Easter holidays for the spike in claims and expected applications to trend lower in coming weeks.

"It's very difficult to know the extent to which that's driven by seasonal effects from Easter or not," said Eric Green, chief economist at TD Securities in New York.

"This is not a game changer, this does not confirm the weakness in the report we saw last Friday. We suspect that much of the increase was due to seasonal issues and we would therefore expect it to drift lower."

The claims data comes in the wake of Friday's disappointing employment report for March, which showed the economy created 120,000 new jobs, the smallest amount since October.

Despite the rise in claims last week, both first-time applications for unemployment aid and the four-week average held below the 400,000 mark, implying steady job gains.

US stock index futures pared gains on the data, while US government debt prices rose. The dollar weakened against the euro and the yen.

There was good news in other data today, with producer prices flat in March and the trade deficit narrowing sharply in February.

The US trade deficit shrank 12.4 per cent to $46 billion in February, the biggest month-to-month decline since May 2009, the Commerce Department said, as exports hit a record high.

That could prompt economists to raise their estimates for first-quarter gross domestic product.

US producer prices were unchanged last month after advancing 0.4 per cent in February.

Economists polled by Reuters had expected prices at farms, factories and refineries to rise 0.3 per cent.

Wholesale prices excluding volatile food and energy costs rose 0.3 per cent after February's 0.2 per cent gain.

That was a touch above economists' expectations for a 0.2 per cent advance and marked the fifth successive month of increases in core PPI.

Over one-third of the rise in core PPI was attributed to prices for light motor trucks. Higher costs for passenger cars, soaps and detergents also contributed to the advance in core PPI.

However, manufacturers have limited scope to pass on these increased costs to consumers given the still considerable slack in the economy.

Overall producer prices were held back by a 2.0 per cent fall in gasoline, the largest decline since October, after a 4.3 per cent jump in February. That offset a 0.2 per cent rise in food prices, which halted three straight months of declines.

However, fuel prices rose 7.5 per cent, when seasonal factors are excluded.

In the 12 months to March, wholesale prices increased 2.8 per cent, the smallest increase since June 2010, after advancing 3.3 per cent in February.

Outside food and energy, producer prices were pushed up by light motor trucks prices, which rebounded 0.7 per cent after falling 0.4 per cent in February. Passenger car prices rose 0.8 per cent after edging up 0.1 per cent the prior month.