The US economy just delivered two pretty convincing signs that the labor market is getting pretty tight.Jobless claims tank
Initial weekly unemployment insurance claims, or jobless claims, plunged to 262,000 from 296,000. This was much lower than the 290,000 expected by economists, and it also represented a 15-year low.
Continuing claims fell to 2.253 million from 2.327 million a week ago. This is the lowest level since December 2000.
"The ongoing improvement in continuing claims is particularly encouraging and is consistent with recent declines in the unemployment rate, suggesting that unemployed workers continue to find gainful employment," TD Securities' Cheng Chen said.Worker pay accelerates
Wages are on the rise. The employment cost index (ECI) climbed by 0.7% in Q1, a pace that was a bit stronger than the 0.6% rate expected by economists.
This represents a 2.6% gain from a year ago, a big jump from the 2.2% gain last quarter.
Private wages jumped 2.8% in the past year, the biggest jump since Q3 2008.
"These growth rates are still quite modest by historical standards, but the upward trend is now very obvious," Capital Economics' Paul Ashworth said.
"While the market was expecting a firm print in q/q terms, the rate of acceleration in y/y terms is likely to be taken as a sign that the economy is beyond full employment," BNP Paribas economist Bricklin Dwyer said.
The unemployment rate is still somewhere above 0% during full employment, as even in a healthy economy there should still be people in between jobs looking for work.
While this report is updated pretty infrequently, it has nevertheless received more attention as the debate over US wage growth has intensified.
"The ECI often is considered the best overall measure of labor costs because it includes other forms of compensation besides hourly pay (such as commissions) as well as benefit costs (which account for more than 30% of the total)," Credit Suisse economists explained on Friday. "Also, the ECI is not distorted by shifts in the industry mix, unlike average hourly earnings."
In the past, traders have attributed spikes in market volatility to big moves in the ECI. Ahead of Thursday's release, Deutsche Bank's Torsten Slok warned clients, "Hold on to your chair."
"The employment costs index has increased at a strong pace for four consecutive quarters now, and we view this as consistent with the improvement in labor markets, the decline in the unemployment rate, and diminishing underutilization of the labor force," Barclays' Blerina Uruši said. "We expect activity to continue expanding at a solid rate for the rest of this year, despite the Q1 15 weakness, and we think the unemployment rate will continue to fall. As a result, we expect wage growth to rise gradually this year, reflecting continued labor market improvement."
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See Also:DEUTSCHE BANK: 'Hold on to your chair...'Wage growth is clearly accelerating if you look at it this wayThe stock market should be VERY interested in the big wage report coming up this week