WASHINGTON - The number of Americans filing new claims for unemployment benefits fell more than expected last week and compensation accelerated in the third quarter, in the latest signs of tightening labor market conditions.
Thursday’s upbeat data underscored the resilience of the economy and some analysts said the pickup in wage growth moved the Federal Reserve closer to start raising interest rates.
“The first precondition to higher policy rates is now being achieved,” said Eric Green, chief economist at TD Securities in New York.
Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 278,000 for the week that ended on Nov. 1, the Labor Department said. The four-week moving, which irons out week-to-week volatility, hit a 14-1/2 year low.
Wall Street had forecast claims dipping to 285,000. Claims have held below the 300,000 threshold for eight straight weeks.
A report on Wednesday showed private payrolls increased 230,000 in October, for a record seven straight months of job gains exceeding 200,000.
The government is expected to report on Friday that nonfarm payrolls advanced 231,000 last month after rising 248,000 in September, according to a Reuters survey of economists. The jobless rate is seen steady at a six-year low of 5.9 percent.
In a second report, the Labor Department said compensation per hour increased at a 2.3 percent rate in the third quarter after a similar rise in the prior quarter.
But with productivity advancing nearly as much, unit labor costs, a key gauge of inflation and profit pressures that measures the price of labor for any given unit of output, rose at only a 0.3 percent rate after decline at a 0.5 percent pace.
Hourly compensation was up 3.3 percent.
“That is a clear sign that the tightening labor market is forcing firms to pony up a little more money,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
The dollar rose against a basket of currencies on the data. Its appeal was also enhanced after European Central Bank President Mario Draghi affirmed his pledge to use unconventional measures to stimulate a sluggish eurozone economy.
U.S. stocks were trading mixed, with energy shares extending their recent decline. Prices for U.S. Treasury debt fell.
The Fed is closely watching wage growth as it ponders when to raise its benchmark interest rate, which it has kept near zero since December 2008.
The U.S. central bank ended its bond buying program last month, giving an upbeat view of the labor market by dropping its characterization of labor market slack as “significant” and replacing it with “gradually diminishing.”
The increase in compensation adds to other signs of a pickup in wages. A broad wage measure, the employment cost index, recorded its biggest gain since 2008 in the third quarter. Wage growth has been the missing part in the labor market recovery.
“This is one more piece of evidence in the growing case for an early rate hike in 2015,” said John Ryding, chief economist at RDQ Economics in New York.