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Weekly jobless claims increase 2,000 to 230,000

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Continuing claims rise 5,000 to 1.850 million

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Producer prices climb 0.2% in August; up 1.7% year-on-year

By Lucia Mutikani

WASHINGTON, Sept 12 (Reuters) - The number of Americans

filing new applications for unemployment benefits increased

marginally last week, suggesting that layoffs remained low even

as the labor market slows.

Other data on Thursday showed producer prices rising

slightly more than expected in August amid a rebound in the cost

of services, including guest house rentals. The combination of a

fairly stable labor market and still-high inflation further

diminished the chances of the Federal Reserve cutting interest

rates by 50 basis points next Wednesday, when the U.S. central

bank is expected to start its long-awaited easing cycle.

The reports followed data this month showing the

unemployment rate retreated in August from a near three-year

high touched in July and underlying inflation indicating some

stickiness last month. Financial markets have slashed the odds

of a half-point rate reduction to less than 15%.

"Producer prices are not too hot and the employment markets

are not deteriorating too much either, so there is probably no

need for Fed officials to surprise the markets with a bigger-

than-expected 50 basis points rate cut next week," said

Christopher Rupkey, chief economist at FWDBONDS.

Initial claims for state unemployment benefits rose 2,000 to

a seasonally adjusted 230,000 for the week ended Sept. 7, the

Labor Department said. Economists polled by Reuters had forecast

230,000 claims for the latest week.

Last week's data included the Labor Day holiday. Claims tend

to be volatile around public holidays. They have, however, been

little changed since dropping from an 11-month high of 250,000

in late July.

Unadjusted claims decreased 12,968 to 177,663 last week, led

by substantial declines in California, Georgia, Michigan, Ohio

and New York. No state reported increases in claims above 1,000.

The slowdown in the labor market is being driven by

businesses scaling back on hiring as higher interest rates curb

demand throughout the economy. Government data last week showed

nonfarm payrolls increasing by less than expected in August but

the unemployment rate falling to 4.2% from 4.3% in July.

Financial markets saw a roughly 13% probability of a 50

basis points rate at the Fed's Sept. 17-18 policy meeting, CME

Group's FedWatch Tool showed. The odds of a 25 basis point rate

reduction are at about 87%.

The central bank has maintained its benchmark overnight

interest rate in the current 5.25%-5.50% range for a year,

having raised it by 525 basis points in 2022 and 2023.

U.S. stocks opened higher. The dollar rose against a basket

of currencies. U.S. Treasury prices fell.

SERVICES PRICES REBOUND

The number of people receiving benefits after an initial

week of aid, a proxy for hiring, increased 5,000 to a seasonally

adjusted 1.850 million during the week ending Aug. 31, the

claims report showed.

The so-called continuing claims have mostly trended lower

through August after surging in July to levels last seen in late

2021. The decline is consistent with the drop in the

unemployment rate last month.

In a separate report on Thursday, the Labor Department said

the producer price index for final demand rose 0.2% in

August. Data for July was revised lower to show the PPI being

unchanged instead of edging up 0.1% as previously reported.

Economists had forecast the PPI gaining 0.1% last month. In the

12 months through August, the PPI increased 1.7% after advancing

2.1% in July.

A 0.4% increase in services accounted for the rise in

the PPI in August. Services, which dropped 0.3% in July, were

last month boosted by a 4.8% surge in the prices of hotel and

motel rooms. But prices for airline fares fell 0.8%. Portfolio

management fees were unchanged.

Trade services, which measure changes in margins

received by wholesalers and retailers, rose 0.6%. Consumers are

pushing back against higher prices, limiting businesses' pricing

power.

Portfolio management fees, hotel and motel accommodation and

airline fares are among components that go into the calculation

of the personal consumption expenditures (PCE) price indexes,

the inflation measures tracked by the Fed for its 2% target.

Goods prices were unchanged last month after rising 0.6% in

July. Energy prices dropped 0.9%. Food prices gained 0.1%.

Excluding the volatile food and energy components, goods prices

climbed 0.2% after a similar advance in July.

The narrower measure of PPI, which strips out food, energy

and trade, rose 0.3%, matching July's gain. The so-called core

PPI increased 3.3% year-on-year after climbing 3.2% in July.