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 The better labor market tone was also captured by a survey on
Thursday showing an acceleration in manufacturing activity in
the Mid-Atlantic region, accompanied by a rise in factory jobs.
"We view the tepid December payroll gain as an aberration and expect
job creation to look stronger in January," said John Ryding, chief
economist at RDQ Economics in New York.
Initial claims for state unemployment benefits slipped 2,000 to a
seasonally adjusted 326,000, the Labor Department said. That
compared to economists' expectations for a fall to 328,000.
Job growth slowed sharply in December, with employers adding only
74,000 new positions. Nonfarm payrolls increased 241,000 in November
and the retreat last month was blamed on cold weather.
In a separate report, the Philadelphia Federal Reserve Bank said its
business activity index rose to 9.4 points this month from 6.4 in
December. Any reading above zero indicates manufacturing expansion
in the region, which includes factories in eastern Pennsylvania,
southern New Jersey and Delaware.
A gauge of factory jobs surged this month, but workers saw a drop in
hours on average. There was a slowdown in new orders.
Even as the economy gathers steam there is little sign of a broad
pick-up in prices, keeping inflation pressures muted.
In another report, the Labor Department said its Consumer Price
Index increased 0.3 percent after being flat in November. In the 12
months to December, consumer prices accelerated 1.5
percent after advancing 1.2 percent in November.
The increases were in line with economists' expectations.
LOW INTEREST RATES BIAS
Stripping out the volatile energy and food components, the so-called
core CPI rose only 0.1 percent, slowing from a 0.2 percent gain in
November.
That left its increase over the past 12 months at 1.7 percent, where
it has now been for four consecutive months.
U.S. Treasury debt prices rose on the tame inflation picture, while
the dollar was little changed against a basket of currencies. Stocks
of Wall Street were trading off early highs.
The Fed targets 2 percent inflation, although it tracks a gauge that
tends to run a bit below CPI.
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The U.S. central bank has started reducing the pace of its monthly
bond purchases, but persistently low inflation is expected to see it
hold interest rates near zero for a long time even if the jobs
market picks up significantly.
"With the amount of slack in the labor market, we do not
anticipate any substantial acceleration in wage growth for quite
some time," said Ethan Harris, co-head of global economics research
at Bank of America Merrill Lynch in New York.
"We expect a patient and gradual end to the current pace of
accommodation. We still believe the Fed will cease asset purchases
by the end of 2014, announcing additional $10 billion cuts in buying
at each policy meeting this year."
Average hourly earnings adjusted for inflation fell 0.3 percent in
December. They rose only 0.2 percent from a year ago.
A 3.1 percent increase in gasoline prices was mostly behind the
spike in inflation last month. The increase in gasoline was the
largest since June and followed a 1.6 percent fall in November. Food
prices rose 0.1 percent for a third month.
Within the core CPI, apparel prices posted their largest increase
since June. They had declined for three consecutive months.
Rental inflation remained elevated in December. While medical care
costs rose, prices for prescription drugs fell significantly last
month.
There were increases in tobacco prices. New motor vehicle prices
were flat, while prices for used cars and trucks fell.
"Low inflation looks set to continue in 2014," said Sam Bullard, a
senior economist at Wells Fargo in Charlotte, North Carolina.
"Prices for imported consumer goods have been flat or fallen in
seven of the past eight months, which should keep downward pressure
on the CPI in coming months."
(Reporting by Lucia Mutikani, additional
reporting by Steven C Johnson in New York; editing by Paul Simao)
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