U.S. jobs, inflation data support tapering of Fed bond buying
By Lucia Mutikani
WASHINGTON (Reuters) - The number of Americans filing new claims for jobless benefits fell to a near six-year low last week and consumer prices rose broadly in July, which could draw the Federal Reserve closer to trimming its massive bond-buying program.
The government reports on Thursday suggested an acceleration in job growth in early August and hinted at pockets of pricing power in the sluggish economy, which could ease concerns among some Fed officials that inflation was too low.
While data on manufacturing was less encouraging, economists were little fazed and said it merely suggested the improvement in factory activity was slower than had been anticipated.
"It looks like the weakness in employment last month was a fluke and the breadth of gains in CPI suggest that there will be less push back against tapering because of low inflation," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester Pennsylvania. "A September taper is still on the table."
The U.S. central bank has said it plans to start trimming the $85 billion in bonds it is purchasing each month to keep borrowing costs low later this year.
The yield on the benchmark 10-year U.S. Treasury note jumped to a two-year high on the data. Stocks on Wall Street suffered their biggest fall since June, also hurt by weak quarterly U.S. sales from retail giant Wal-Mart Stores. The dollar briefly climbed to a near two-week peak against the euro.
First-time applications for state unemployment benefits dropped 15,000 to a seasonally adjusted 320,000, the lowest level since October 2007, the Labor Department said. Economists had expected initial claims to come in at 335,000 last week.
The four-week moving average of new claims, which irons out week-to-week volatility, fell to its lowest level since November 2007, offering hope of an improvement in labor market conditions after hiring slowed a bit in July. Continued...