WASHINGTON, May 5: Stronger productivity and jobless figures gave Wall Street food for thought on Thursday a day ahead of a key employment report that will shed light on whether the US economy is indeed suffering a slowdown. Newly released data closely watched by the Federal Reserve showed that US businesses boosted productivity at a 2.6 per cent annualized pace in the first quarter.

Unit labour costs — a key measure of inflationary pressures from compensation — increased 2.2 per cent at an annualized rate. “Labour costs have gone from a major downward influence on inflation to a roughly neutral — maybe even slightly upward — influence,” said Steve Stanley, chief economist for RBS Greenwich Capital.

“Not a reason for the Fed to panic and go to 50 basis points (hikes in US rates), but another reason for the building concern among central bankers about inflation risks,” he said.

Faced with evidence that inflation is getting stronger while economic growth is flagging, the Federal Reserve has chosen to stick to its core mandate of quelling price pressures by hiking US interest rates repeatedly.

This week the Fed tightened US borrowing costs for the eighth time since June, taking the federal funds 25 basis points higher to 3.0 per cent. Strength in consumer prices and other inflation indicators have taken precedence in the Fed’s thinking over flagging growth figures, which most economists ascribe to a cyclical moderation rather than a full-scale downturn.

Other figures out on Thursday showed that US jobless claims rose 11,000 to a seasonally adjusted 333,000 in the week ended April 30. Economists were expecting initial jobless claims to rise to about 324,000. The Labour Department ascribed the increase to seasonal factors.—AFP