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 Initial claims for state unemployment benefits dropped 23,000 to
264,000, the lowest level since 2000, the Labor Department said on
Thursday.
A separate report from the Federal Reserve showed production at the
nation's factories, mines and utilities advanced a
larger-than-expected 1.0 percent last month, the biggest gain since
November 2012.
The data offered evidence the economy remained on solid ground, with
the labor market gaining steam. Investors in recent days have come
to the view that slowing growth overseas will weigh on the U.S.
economy and force the Fed to delay a hike in interest rates, with
weak retail sales data on Wednesday helping to fuel a global
sell-off in stock markets.
The jobless claims report, however, reinforced expectations that
slack in the labor market was being reduced and, combined with
comments from a top Fed official, put a brake on the selling on Wall
Street.
"Have we achieved full employment? Not yet. Are we getting closer?
Absolutely," said Stephen Stanley, an economist at Amherst Pierpont
Securities.
The Standard & Poor's 500 index <.SPX> closed up marginally, while
the blue chip Dow Jones industrials <.DJI> slipped a bit further.
Yields on U.S. government bonds <US10YT=RR> moved higher.
Some of last week's drop in claims may have been related to the
Columbus Day holiday, economists at RBS told clients.
The government, however, said there were no unusual factors in the
report, and a four-week moving average of claims, which irons out
weekly volatility, also fell to its lowest since 2000.
OASIS OF PROSPERITY?
A Reuters poll published on Thursday showed economists still
clinging to the view that the Fed would raise benchmark borrowing
costs from near zero in the second quarter of next year despite
mounting signs of weakness overseas.
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The poll, however, was largely completed before the latest stock
market sell-off, which has been accompanied by a big shift in
investor expectations for the path of U.S. monetary policy. Interest
rate futures now point to a rate hike in October 2015.
St. Louis Federal Reserve Bank President James Bullard said in a
television interview with Bloomberg that the U.S. central bank might
want to keep its bond-buying stimulus program running for longer
than anticipated to combat the risk of a drop in already low
inflation, comments that eased investors' nerves.
But with the U.S. economy motoring ahead, many analysts said they
expected Bullard's advice to fall by the wayside.
Economists still expect third-quarter growth to come in at around a
3 percent annual rate, a view buttressed by the pickup in industrial
output.
The Fed pinned part of the gain on unusual weather that boosted
air-conditioning use but there was also a broad-based increase in
factory output, which grew a solid 0.5 percent.
A third report from the Fed's Philadelphia branch showed slowing
growth in factory activity in the mid-Atlantic region.
(Reporting by Jason Lange and Tim Ahmann; Editing by Paul Simao and
James Dalgleish)
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