U.S. economic growth showed signs of becoming more self-sustaining as the number of Americans claiming new jobless benefits fell back to a four-year low last week and manufacturing activity in the Northeast picked up this month.
But the impact of higher oil prices also was starting to be seen in data on Thursday. Producer prices racked up their biggest increase in five months in February, while manufacturers in New York state reported a surge in input costs in March.
The recent gains in oil and gasoline prices have raised concerns the higher costs could start to squeeze businesses and consumers and put a dent in the recovery.
Still, producer prices last month did not rise as much as economists had expected, and underlying inflation pressures were contained.
Thursday's initial claims data for state unemployment benefits was further evidence of an improving labor market after the jobless rate held at a three-year low of 8.3 percent in February.
This suggests that the recovery is firmly on track, said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
The Federal Reserve earlier this week acknowledged the recent improvement in the labor market, but remained concerned with the still-high unemployment rate. The central bank also reiterated its expectation it will keep interest rates at ultra-low levels through late-2014 as part of its efforts to support the economy.
Initial claims dropped 14,000 to a seasonally adjusted 351,000 last week, the U.S. Labor Department said, taking claims back to a four-year low reached in February.
The four-week moving average for new jobless claims, considered a better measure of labor market trends, was unchanged at 355,750.
The firming tone in the job market was reinforced by the manufacturing surveys, which showed factories increased employment this month.
The New York Federal Reserve said its Empire State general business conditions index rose to 20.21 - its highest level since June 2010 - from 19.53 in February.
But the components were more mixed, with new orders easing and prices paid racking up their biggest monthly jump in 6-1/2 years.
That was in contrast to a report on factory activity in the mid-Atlantic region, where prices paid rose more slowly in March than in February. The Philadelphia Federal Reserve Bank's business activity index showed manufacturing also continued to grow in the region, rising to 12.5 from 10.2.
HOPEFUL SIGNS ON JOBS
Thursday's reports were the latest to imply the economy was holding its own, even though the pace of growth was expected to slow this quarter from the fourth quarter's 3 percent annualized clip.
The data helped Wall Street push higher in early afternoon trading, sending the S&P 500 over the 1,400 level for the first time in four years.
Economists are trying to determine how much an unusually warm winter has contributed to the recent string of positive data. Signs of a lull in the spring would suggest activity was not as strong as it looked and was simply pushed earlier into the year.
We think the spring is an important test for not only jobs data, but for a wide variety of economic indicators, Dana Saporta, director of U.S. economics at Credit Suisse, wrote in a note.
If we don't get a softer run of numbers for a few months, it would tell us that the economy is on much stronger ground, and the odds of (quantitative easing) or any other Fed stimulus would decline significantly.
First-time applications for jobless benefits have been tucked in a tight range since mid-February, a hopeful sign for the labor market, which has enjoyed three straight months of employment gains above 200,000.
In a second report, the Labor Department said its seasonally adjusted producer price index increased 0.4 percent last month, quickening from January's 0.1 percent gain, though shy of expectations for a 0.5 percent gain.
Wholesale prices excluding volatile food and energy costs rose 0.2 percent, moderating from January's 0.4 percent increase. While that was in line with economists' expectations, it was the third consecutive month of increases in core PPI.
Overall producer prices were lifted by a 1.3 percent increase in energy prices after a 0.5 percent drop in January. Food prices dipped 0.1 percent after falling 0.3 percent the prior month.
The Fed said on Tuesday the recent steep run-up in oil and gasoline prices would push inflation up only temporarily.
Reports on the housing market offered signals the backlog of foreclosures was starting to move, albeit at a slow pace.
Data from RealtyTrac showed the number of Americans receiving delinquency notices on their homes rose 1 percent in February from a month earlier, but overall foreclosure filings, which include default notices, scheduled auctions and bank repossessions, dropped 2 percent.
A separate report from CoreLogic showed more foreclosures were finished in January than the month before, but the amount was still short of levels seen a year ago.
The pipeline of foreclosures, which have been held up as banks sorted out legal problems with loan documentation, is one of the major challenges facing the housing market. Clearing this inventory could put further downward pressure on home prices, but eventually lay the ground for a healthier market.
(Editing by Andrea Ricci and Neil Stempleman)