Jobless claims point to further tightening labor market conditions

According to the data published by Labor Department, the number of Americans filing for unemployment benefits fell to 223K for the week ended Fed. 24, the lowest number since 1973. Accompanying yesterday’s Fed’s Beige Book, which reported widening labor shortages and pickup in the pace of wage growth in some areas, today’s data points to further tightening labor market conditions.

An active labor market coupled with rising inflation, as reflected by yesterday’s PCE data, suggests that Fed is even closer to a rate hike in March. Fed’s preferred tool to measure inflation, PCE index, leaped by 0.4% for the month of January, pushing the yearly rate to 1.9% from 1.6% in December. This number matches the highest year-over-year reading since October 2012.

Markets are pricing a 75% probability of a hike in March, up from 66% on Wednesday and 35% on Tuesday, based on CME Group’s FedWatch Tool.