By Lucia Mutikani
WASHINGTON (Reuters) - The U.S. labor market appeared to gain momentum in early September as fewer Americans filed for weekly unemployment benefits, but weak inflation pressures may complicate the Federal Reserve's decision whether to raise interest rates.
Initial claims for state unemployment benefits dropped 6,000 to a seasonally adjusted 275,000 for the week ended Sept. 5, the Labor Department said on Thursday. It was the 27th straight week that claims remained below the 300,000 threshold, which is usually associated with a strengthening labor market.
The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, ticked up 500 to 275,750 last week.
"Consistently low readings for initial and continuing jobless claims suggest that the separations side of the labor market remains healthy, and we see little reason to expect a meaningful shift in labor market dynamics in the near term," said Jesse Hurwitz, an economist at Barclays in New York.
In another report, the Labor Department said import prices fell 1.8 percent last month as the cost of petroleum and a range of goods dropped, after sliding 0.9 percent in July.
August's drop in import prices was the largest in seven months and suggested a strong dollar and soft global demand continued to put downward pressure on imported inflation. Import prices now have declined in 12 of the last 14 months.
In the 12 months through August, import prices declined 11.4 percent, the largest drop since September 2009.
Very low inflation, in the face of a tightening labor market and strengthening economic growth, poses a challenge for the Fed's policy-setting committee, which meets on Sept. 16-17.
Economists are divided on whether the U.S. central bank will raise rates at that meeting in the wake of recent volatility in global financial markets, which was sparked by fears of slower growth in China and other major emerging markets.
The Fed has not raised rates in nearly a decade.
"Coming at a time when the Fed is contemplating a lift-off in rates, the weak tone of this report should come as a key reminder to the Fed that the disinflationary impulse is re-emerging," said Millan Mulraine, deputy chief economist at TD Securities in New York.
U.S. stocks were generally flat, while prices for longer-dated U.S. government debt rose. The dollar was slightly weaker against a basket of currencies.
HEALTHY JOB MARKET
The labor market is tightening rapidly. Job openings are at a record high and the economy has added an average of 221,000 jobs per month over the past three months, far more than the amount needed to keep up with population growth.
The unemployment rate, which is at a 7-1/2-year low of 5.1 percent, is within the range that most Fed officials see as consistent with a low but steady rate of inflation. That could bolster expectations that a pick-up in wages will help lift inflation toward the central bank's 2 percent target.
For now, inflation is trending lower. Last month, imported petroleum prices tumbled 14.2 percent, the biggest drop since January, after falling 5.9 percent in July.
Import prices excluding petroleum slipped 0.4 percent in August, the eighth consecutive monthly drop.
That likely reflects the impact of the dollar's 17.5 percent rise against the currencies of the United States' main trading partners since June 2014. Imported food prices rose modestly last month and prices for capital goods automobiles fell.
A third report from the Commerce Department showed wholesale inventories fell in July for the first time in nearly two years, a tentative sign that businesses were starting to whittle down a huge stockpile of merchandise that could weigh on production in the second half of the year.
(Reporting by Lucia Mutikani; Editing by Paul Simao)