1/2 years, as employers hired 193,000 workers in the month. Analysts say much of the slack in the U.S. labor market has been mopped up, and with the economy near full employment -- a theoretical level indicating the lowest level of unemployment that can be sustained without triggering wage inflation -- the Fed will keep lifting interest rates. U.S. growth is also expected to rebound smartly in the first quarter following tepid growth in the final three months of last year, and upbeat labor market data is seen as further evidence of the economy's underlying strength. Against this backdrop, the Fed has hiked the target overnight fed funds rate in 14 quarter-percentage-point steps since June 2004 to 4.5 percent and financial futures markets see another move at its next meeting, on March 27-28. Odds that official rates will have reached 5.0 percent by July are hovering around 75 percent. "If unemployment continues to decline and the economy grows at an above-average pace ... I think they (the Fed) will be a little more concerned about bottlenecks," said Thayer, referring to job shortages that can push up wages. The four-week moving average of initial claims, which smooths weekly volatility to yield a more reliable indication of underlying trends in the labor market, declined by 7,750 to 276,500, its lowest level since April 2000. The report also showed the number of people still on the jobless rolls after drawing an initial week aid rose by 60,000 to 2.56 million in the week ended Jan. 28, the most recent period for which these data are available. Wall Street had expected continued claims to rise to 2.52 million. In other data, the Commerce Department said wholesale inventories rose 1.0 percent in December, above expectations, as car stocks climbed and inventories of non-durable goods posted the largest monthly gain in nearly five years. Wall Street had forecast a 0.4 percent increase in wholesale inventories. The inventories-to-sales ratio, which measures how quickly stocks would be depleted at the current sales pace, was unchanged at 1.15 months' worth in December, a historically lean level. --SP 22 37 Local Time 19 37 GMT
