The number of Americans applying for unemployment benefits suddenly declined last week to the lowest level of nearly 45 years, rising expectations for faster wage growth this year. New jobless claims are reduced by 9,000 to the seasonally adjusted 221,000 for the week ending February 3rd. The applications fell to 216,000 in mid-January, the lowest level since January 1973.
The results surprised the market, as the economists surveyed predicted that requests would increase to 232,000. Last week was the 153th week, when applications remain below the threshold of 300,000. This is the longest period since the 1970s when the labor market was much smaller.
The US labor market is near full employment, with the unemployment rate at the lowest level of 17 years of 4.1%, which is putting pressure on wage increases.
The Labor Ministry reported last week that the average hourly wage jumped by 2.9% yoy in January, the biggest increase since June 2009, after rising 2.7% in December.
The strong wage growth has maintained optimism among Federal Reserve employees that inflation will increase this year against the 2% target. The US financial markets expect the Federal Reserve to raise interest rates in March.