More Americans than expected filed new claims for jobless aid last week and consumer prices were flat in January, supporting the argument for the Federal Reserve to maintain its very accommodative monetary policy stance.
Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 362,000, the Labor Department said on Thursday.
It said in a second report that consumer prices were flat for a second consecutive month in January. The data comes amid growing signs of divisions at the Fed over its bond buying program aimed to stimulate the sluggish economic recovery.
"The job market is gradually improving but not fast enough for the Fed to remove accommodation. We still think a Fed rate hike is a late 2014 to early 2015 event," said Jacob Oubina, a senior economist at RBC Capital Markets in New York.
Concerns over tepid job growth prompted the U.S. central bank last year to embark on an open-ended bond buying program. It said it would keep up the program, which it hopes will push down borrowing costs, until it saw a substantial improvement in the outlook for the labour market.
The Fed also has committed to hold interest rates near zero until unemployment reaches 6.5 per cent, provided inflation does not threaten to push over 2.5 per cent.
However, minutes of the Jan. 29-30 policy meeting published on Wednesday showed some Fed policy makers feel the central bank may have to slow or stop the asset purchases before it sees an acceleration in job growth because of concerns over the costs of the program.
Economists polled by Reuters had expected first-time jobless applications to rise to 355,000. Last week's data covered the survey period for the February nonfarm payrolls report. Claims were up 27,000 between the January and February survey periods.
But this probably does not suggest any material change in the pace of job growth given that claims been very volatile since January because of difficulties smoothing the data for seasonal fluctuations.
With inflation pressures well contained and the labour market only gradually improving, a shift in Fed policy is unlikely.
Last month, the consumer price index was held back by weak gasoline prices and food prices, which were unchanged after rising over the past months, the Labor Department said.
Economists polled by Reuters had expected the CPI to edge up 0.1 per cent. In the 12 months through January, consumer prices rose 1.6 per cent, the smallest gain since July. They had advanced 1.7 per cent in December.
However, consumer prices excluding food and energy rose 0.3 per cent – the largest gain since May 2011. The so-called core CPI had increased 0.1 per cent in December.
In the 12 months through January, core CPI increased 1.9 per cent after rising by the same margin in December. That is just below the Fed's 2-per-cent goal.
Gasoline prices fell 3.0 per cent after dropping 1.9 per cent the prior month. But the decline in gas probably has run its course as prices at the pump have increased 44 cents (U.S.) so far this year.
Elsewhere, apparel prices increased 0.8 per cent after gaining 0.1 per cent in December. New motor vehicle prices rose 0.1 per cent after advancing 0.2 per cent the prior month.
Prices for used cars and trucks rose 0.2 per cent after six consecutive months of declines. Airline fares rose for a fifth month in a row.
Housing costs edged up, with owners' equivalent rent rising 0.2 per cent.
Meanwhile, factory activity in the U.S. mid-Atlantic region unexpectedly contracted in February for the second month in a row, falling to the lowest level in eight months as new orders tumbled, a survey showed on Thursday.
The Philadelphia Federal Reserve Bank said its business activity index dropped to minus 12.5 from minus 5.8 in January, coming in far below economists' expectations for positive 1.0. It was the lowest level since June of last year.
A reading below zero indicates contraction in the region's manufacturing sector. The survey covers factories in eastern Pennsylvania, southern New Jersey and Delaware.
The gauge of new orders fell to minus 7.8 from minus 4.3.
The report is seen as one of the first monthly indicators of the health of U.S. manufacturing leading up to the national report by the Institute for Supply Management.