The number of Americans filing for unemployment benefits unexpectedly fell last week, pointing to a further tightening of labor market conditions.
Other data on Thursday showed a moderation in factory activity in the mid-Atlantic region in June amid a decline in new orders. Firms, however, continued to report overall increases in employment this month.
The robust labor market, which is underpinning economic growth, likely will pave the way for the Federal Reserve to raise interest rates two more times this year. The U.S. central bank last week increased borrowing costs for a second time this year and forecast two more rate hikes by the end of 2018.
"The U.S. labor market is tightening," said Maria Cosma, an economist a Moody's Analytics in West Chester, Pennsylvania. "Though unemployment benefits claims are not a perfect measure of layoffs, they highlight the strength of the labor market and suggest the unemployment rate has nowhere to go but lower."
Initial claims for state unemployment benefits decreased 3,000 to a seasonally adjusted 218,000 for the week ended June 16, the Labor Department said. Economists polled by Reuters had forecast claims rising to 220,000 in the latest week. Claims have now declined for four straight weeks.
The labor market is viewed as being near or at full employment, with the jobless rate at an 18-year low of 3.8 percent. The unemployment rate has dropped by three-tenths of a percentage point this year and is near the Fed's forecast of 3.6 percent by the end of this year.