US jobless claims down 5,000, labour market tightens

The number of Americans filing for unemployment benefits fell last week, pointing to a tightening labor market that likely keeps the Federal Reserve on course to announce plans next month to start reducing its massive bond portfolio.

Labor market strength was also underscored by another report on Thursday showing US-based employers in July announced the fewest job cuts in eight months.

"The labor market remains tight as a drum even if it is not throwing off the sparks of higher wages and more inflation," said Chris Rupkey, chief economist at MUFG in New York. "The Fed can continue mopping up the stimulus provided to fight the financial crisis and recession."

Initial claims for state unemployment benefits decreased 5,000 to a seasonally adjusted 2,40,000 for the week ended July 29, the Labor Department said. Economists had forecast claims falling to 242,000.

Claims have now been below 300,000, a threshold associated with a healthy labour market, for 126 straight weeks. Thatis the longest such stretch since 1970, when the labour market was smaller. The labour market is near full employment, with the thejobless rate at 4.4 percent.

Economists believe that labour market tightness will encourage the Fed to announce a plan to start offloading its $4.2 trillion portfolios of Treasury bonds and mortgage-backed securities in September.
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