2018.05.1721:31:00UTC+00U.S. Labor Market Continues to Tighten

New applications for U.S. jobless benefits increased more than expected last week, but the number of people continuing to collect unemployment benefits fell to 1.71 million in the week ended May 5, the lowest since December 1973, which points to diminishing labor market slack.

Separate data also showed a pickup in mid-Atlantic factory activity this month, with manufacturers saying they were boosting employment and asking for higher prices for their products. The combination of a tightening labor market and firming inflation bolsters expectations the Federal Reserve will hike interest rates in June.

Initial claims for state unemployment benefits rose 11,000 to a seasonally adjusted 222,000 for the week ended May 12, the Labor Department said.

The labor market is viewed as being close to or at full employment, with the unemployment rate near a 17-½ -year low of 3.9 percent and within striking distance of the Fed's forecast of 3.8 percent by the end of this year. The U.S. central bank increased rates in March and forecast at least two more hikes for this year.

The number of people receiving benefits after an initial week of aid decreased 87,000 to 1.71 million in the week ended May 5, the lowest level since December 1973. Declining continuing claims underscore tightening labor market conditions and support economists' expectations that wage growth will accelerate in the second half of the year.

The labor market and regional factory data added to upbeat reports this week on consumer spending and industrial production in suggesting that economic growth was picking up early in the second quarter after slowing at the start of the year.