U.S. economic outlook brightens as job market tightens

New applications for U.S. jobless benefits unexpectedly fell last week and the number of Americans on unemployment rolls tumbled to a 28-1/2-year low, pointing to rapidly shrinking labor market slack.

The economy’s brightening prospects were further boosted by other data on Thursday showing a sharp acceleration in factory activity in the mid-Atlantic region in May as manufacturers reported a jump in goods shipments and more hours for workers. In addition, a gauge of future U.S. economic activity rose again in April.

The cloud over Trump, stemming from his firing last week of the FBI chief and reports that the U.S. leader disclosed national security information to Russian officials, is seen as a threat to an ambitious economic agenda that includes tax cuts.

“Based on … how the U.S. political system works, President Trump was never going to be able to legislate as boldly, and unilaterally, as some rhetoric suggested,” said James Athey, senior investment manager at Aberdeen Asset Management in London. “Global growth is picking up in the background and everything suggests that the Fed will stick to its hiking plan,”

Initial claims for state unemployment benefits decreased 4,000 to a seasonally adjusted 232,000 for the week ended May 13, declining for three consecutive weeks, the Labor Department said. That pushed claims close to levels last seen in 1973.

Economists had forecast claims rising to 240,000 last week.

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