US jobless claims fall as inflation remains tame

Thursday 20 February 2014 19.07
Cold weather continues to put a strain on household budgets
Cold weather continues to put a strain on household budgets

The number of Americans filing new claims for unemployment benefits fell last week, pointing to steadily improving labour market conditions, despite two months of weak hiring in a row.

Other data today showed that relentlessly cold weather was putting a strain on household budgets, with electricity and heating fuel prices surging in January.

However, inflation pressures remained muted.

Initial claims for state unemployment benefits declined 3,000 to a seasonally adjusted 336,000, the Labor Department said. That was mostly in line with economists' expectations.

The claims data covered the survey week for February's non-farm payrolls report. Snow storms hit parts of the country last week, which could have kept some workers at home.

Bitterly cold weather was blamed for a sharp slowdown in hiring in December and January's marginal bounce back. Claims have been tucked in a 325,000-348,000 range this year suggesting no fundamental shift in labour market conditions.

In a second report, the department said strong gains in the price of household energy had accounted for most of the 0.1% rise in its consumer price index in January.

The CPI had advanced 0.2% in December and last month's rise was in line with economists' expectations.

In January, electricity prices rose 1.8%, the largest gain since March 2010. Natural gas prices surged 3.6% - the the largest rise since April. The cost of heating oil jumped 3.7%, the biggest increase since September 2012.

Meanwhile, in a third report, the department said weekly average earnings adjusted for inflation rose 0.1% in January after sliding 0.5% in December. 

Consumer prices advanced 1.6% in the 12 months to January, after increasing 1.5% in December. Stripping out the volatile energy and food components, the so-called core CPI also rose 0.1% in January for the third month in a row. In the 12 months to January, core CPI rose 1.6%, slowing from a 1.7% increase in December and the smallest rise since June.

With consumer inflation continuing to run below the Federal Reserve's 2% target, monetary policy is likely to remain accommodative for a while even as the Fed reduces the amount of money it is injecting into the economy each month.

Within the core CPI, there were increases in rents, medical care costs and prescription drugs. Tobacco prices recorded their largest gain since July. These tend to rise at the beginning of the year because of tax hikes.

Elsewhere, there were declines in the price of new cars, prices for used cars and trucks and clothing. Airline fares also dropped 2.2%.