New US claims for unemployment benefits rose more than expected last week while unit labor costs fell in the third quarter, underlining the persistent weakness in the jobs market.
Although other data on Thursday showed nonfarm productivity rebounded at a much stronger-than-expected 1.9% annual rate in the third quarter, the general tone remained consistent with a sluggish economy.
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Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 457,000, the Labor Department said, reversing the prior week's decline.
Analysts polled by Reuters had forecast claims rising to 443,000 from the previously reported 434,000. The government revised the prior week's figure up to 437,000.
In a second report, the department said unit labor costs, a gauge of potential inflation pressures closely watched by the Federal Reserve, fell at a 0.1% rate after rising a revised 1.3% in the second quarter.
"This suggests the labor market is not improving as much as we hoped .... and suggests there hasn't been that much of a change between September and October labor market conditions," said Zach Pandl, a US economist at Nomura Securities International in New York.Concerns about the lackluster recovery and stubbornly high unemployment prompted the Federal Reserve on Wednesday to announce it would buy an additional USD 600 billion worth of government bonds by the middle of next year.
The second round of asset purchases is intended to push interest rates further down, thereby stimulating domestic demand, and prevent the current low inflation environment from spiraling into a damaging bout of deflation.
US stock index futures trimmed gains on the claims report, while Treasury debt prices extended gains. The US dollar extended losses versus the yen.
The claims data has little influence on October's employment report due on Friday as it falls outside the survey period. The government is expected to report that nonfarm payrolls increased 60,000 last month, which would be the first expansion since May, after dropping 95,000 in September.
A Labor Department official said there was nothing unusual in the claims data and described the report as fairly clean.
The four-week average of new jobless claims, considered a better measure of underlying labor market trends, rose 2,000 to 456,000.
The rise in productivity in the third quarter, which exceeded economists expectations for a 1% growth pace, implied little need for businesses to step up hiring.
However, economists say at some point firms will no longer be able to meet demand by making their operations more efficient and will need to increase payrolls.
"The big picture is that firms are trying to squeeze every ounce out of the workers they have and this is one reason they feel no need to hire," said Cary Leahey an economist at Decision Economics in New York.
During the third quarter, hours worked increased at a slower 1.1% rate after a 3.5% pace in the second quarter
