The number of Americans filing for unemployment benefits unexpectedly fell last week to near a 43-year low, amid a further tightening of the labor market that could eventually spur faster wage growth. Initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 234,000 for the week ended Feb. 4, the Labor Department said on Thursday. That left claims just shy of the 43-year low of 233,000 touched in early November. Claims have now remained below 300,000, a threshold associated with a strong labor market, for 101 straight weeks. That is the longest stretch since 1970, when the labor market was much smaller. The labor market is at or close to full employment, with the unemployment rate at 4.8 percent. It hit a more than nine-year low of 4.6 percent in November. The economy created 227,000 jobs in January.
Prices of U.S. Treasuries extended losses after the data. U.S. stock index futures were trading slightly higher as was the dollar . DXY against a basket of currencies. Further tightening in labor market conditions could boost wage growth, which has remained stubbornly sluggish despite anecdotal evidence of more companies struggling to find qualified workers.
Lackluster wage growth, if sustained, could hurt consumer spending and crimp economic growth. Economists polled by Reuters had forecast first-time applications for jobless benefits rising to 250,000 in the latest week. A Labor Department analyst said there were no special factors influencing last week's data and no states had been estimated.
The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 3,750 to 244,250 last week, the lowest level since November 1973. The claims report also showed the number of people still receiving benefits after an initial week of aid increased 15,000 to 2.08 million in the week ended Jan. 28. The four-week average of the so-called continuing claims fell 3,750 to 2.08 million.
Verizon Communications Inc's (VZ. N) announcement that it will once again offer an unlimited pricing plan marks a shift in its thinking as a price war among the four biggest U. S wireless carriers accelerates. The biggest wireless carrier in the U.S. said on Sunday that it will offer an unlimited data plan, its first in more than five years. The plan, priced at $80 a month for unlimited data, talk and text on a single line, is cheaper than AT&T's unlimited plan for DirecTV now and U-Verse subscribers but costs more than plans offered by smaller rivals T-Mobile USA (TMUS. O) and Sprint Corp (S. N). On Monday, Verizon also said it was offering free smartphones for customers who switched over. T-Mobile shares fell 2.8 percent in early afternoon trading on Nasdaq. AT&T, Sprint and Verizon shares were down roughly 1 percent on the New York Stock Exchange as investors worried about how a price war would erode margins.
Verizon stopped offering unlimited plans in 2011 largely due to concerns about network capacity and a desire to charge more to customers who were heavier users of data, Dave Heger, senior equity analyst at Edward Jones, said in an interview. On an earnings conference call with investors in late January, Chief Financial Officer Matt Ellis said the quality of Verizon's network allowed the company to maintain a premium price, adding that an unlimited plan was "not something we feel the need to do.""Verizon resisted going back to unlimited if they could," Heger said. "It became obvious that the market wasn't going to necessarily allow that."
The move could hurt the industry's profit margins, putting more pressure on major players to cut costs, analysts said. "As the carrier was the last holdout, the announcement solidifies the industry's move back to unlimited plans which ultimately constricts growth and elevates the pressure to drive down network costs," Amir Rozwadowski, an analyst at Barclays, said in a note.
But Jennifer Fritsche, an analyst at Wells Fargo, argued that the move was a "fightback" moment for the company. Verizon said in January that it added fewer subscribers than anticipated in the fourth quarter. Defections among wireless customers who pay bills on a monthly basis increased to 1.10 percent of total wireless subscribers, compared with the average analyst estimate of 1.05 percent, according to FactSet.