WASHINGTON -- Fewer Americans than forecast filed for unemployment benefits last week, a sign labor market momentum continues to strengthen.
Weekly applications for unemployment aid dropped 12,000 to a seasonally adjusted 267,000, the Labor Department said Thursday, near a 15-year low reached two months ago. The four-week average, a less volatile measure, declined 2,000 to 276,750.
The data are "very encouraging labor market news," said Jennifer Lee, an economist at BMO Capital Markets.
Positive economic reports Thursday and Wednesday's Federal Reserve decision on interest rates ignited a stock market rally Thursday that vaulted the Nasdaq composite index to an all-time high. The Dow Jones industrial average rose 180.10 points, or 1 percent, to 18,115.84 and the Nasdaq jumped 68.07 points, or 1.3 percent, closing at 5,132.95.
The Fed on Wednesday voted to leave the benchmark federal funds rate unchanged near zero during a regular policy meeting. Analysts believe the Fed will raise the rate for the first time in nearly a decade sometime this year.
The Labor Department said the number of people receiving benefits fell 50,000 to 2.22 million last week. That figure has fallen 14 percent in the past year.
Weekly claims for unemployment benefits have been "mostly been locked in this general range for quite some time now, but still with that underlying downward bias," said Douglas Porter, chief economist at BMO Capital Markets in Toronto. "The job market remains very strong. I don't think that bigger picture has changed."
The figures suggest that Americans are enjoying solid job security. Applications, a proxy for layoffs, have remained below 300,000, a historically low level, for 15 weeks. The trend indicates that employers are confident enough in future consumer demand to retain their staffs.
Employers have also hired at healthy levels in recent months. They added 280,000 jobs in May, a strong showing. Last year's monthly average of 263,667 was the most in 15 years.
The unemployment rate rose to 5.5 percent in May from 5.4 percent in April, but even that contained some good news: More Americans, encouraged by their prospects, started looking for work last month. Not all immediately found jobs, so their numbers lifted the unemployment rate.
Other data show that the economy is picking up after faltering at the start of the year. Americans stepped up their spending at retail stores in May, a sign that job growth and cheaper gasoline prices are finally encouraging more consumers to spend freely. And auto purchases in May rose to the fastest sales pace since July 2005.
A healthier consumer could be a key driver of growth in the second half of this year, economists say. Consumer spending accounts for about 70 percent of economic activity.
The economy contracted 0.7 percent in the first three months of the year, a sharp slowdown from growth of 3.6 percent in the second half of last year. Yet that is seen as temporary: Most economists expect growth will recover to a 2 percent to 2.5 percent pace in the second quarter.
The index of U.S. leading economic indicators climbed more than forecast in May, a sign that growth will pick up in the second half of the year.
The 0.7 percent increase in the Conference Board's index, a measure of the outlook for the next three to six months, matched the April advance, the New York-based group said Thursday. The median forecast of economists in a Bloomberg survey called for a 0.4 percent gain. The back-to-back rise was the strongest since the middle of 2014.
The measure corroborates other data showing the economy is healing after backsliding in the first quarter. Faster job gains and signs of a pickup in wages will help provide additional fuel for the world's largest economy.
The index is "confirming the outlook for more economic expansion in the second half of the year after what looks to be a much weaker first half," Ataman Ozyildirim, an economist at the Conference Board, said in a statement. "While residential construction and consumer expectations support the more positive outlook, industrial production and new orders in manufacturing are painting a somewhat more mixed picture."
The Commerce Department said Thursday that the nation's trade deficit in the current account increased to $113.3 billion in the first quarter, up 9.9 percent from a fourth-quarter deficit of $103.1 billion. It was the largest imbalance since a $118 billion deficit in the second quarter of 2012.
The current account tracks not only trade in goods and services but also investment flows. For the first quarter, the trade deficit increased as exports of goods fell to $382.7 billion from $409.1 billion.
Part of that decline reflected falling oil prices. But American exporters have also been hurt by a stronger dollar, which makes their products more expensive overseas.
The Fed took note of the weakness in exports in its policy statement Wednesday, saying it was one of the factors holding back the overall economy this year.
A bigger trade deficit subtracted nearly 2 percentage points from growth in the first quarter, sending the overall economy into reverse with the gross domestic product falling at an annual rate of 2 percent in the January-March period.
The economy is expected to rebound in the April-June quarter with many economists forecasting growth of around 2 percent. The expectation is that strong employment gains will bolster consumer spending and drive faster overall growth.
Information for this article was contributed by Christopher S. Rugaber and Martin Crutsinger of The Associated Press and by Michelle Jamrisko and Victoria Stilwell of Bloomberg News.
Business on 06/19/2015