Applications for unemployment benefits dropped last week to the lowest level since April, a sign the weakness in the labor market is fading.
Jobless claims fell by 24,000 to 398,000 in the week ended July 23, Labor Department figures showed on Thursday in Washington. The level of claims was fewer than forecast, as the median estimate of economists in a Bloomberg News survey called for a drop to 415,000. There were no special factors associated with the decrease other than the usual volatility that occurs each year in July, a Labor Department spokesman said.
A reduction in firings is a necessary step toward the point when employers are more willing to add workers. The lack of hiring means the unemployment rate will probably keep hovering near nine per cent, restraining consumer spending, which accounts for about 70 per cent of the economy.
“Layoffs clearly remain elevated, but the worst part of the adjustment to the first-half slowdown is abating,” said Richard DeKaser, an economist at Parthenon Group in Boston. “I still don’t expect relief on the unemployment rate in the next few months.”
Stock-index futures rose after the report, erasing earlier losses. The contract on the Standard & Poor’s 500 Index maturing in September rose 0.2 per cent to 1,301.3 at 8.36 am in New York. Treasury securities held earlier gains, sending the yield on the benchmark 10-year note down to 2.95 per cent from 2.98 per cent late yesterday.
SURVEY RESULTS
The median forecast was based on a survey of 44 economists. Estimates ranged from 400,000 to 440,000. The Labor Department revised the prior week’s figure up to 422,000 from a previously reported 418,000.
The seasonal-adjustment figures projected a drop for last week as the usual quarter-end increase receded, and the actual decrease was even larger, the Labor Department spokesman said as the data was released to the press. The projected drop also reflected the end of the traditional auto retooling shutdowns.
The timing of closing for the new model year has been difficult to predict this year, making adjusting the claims data for these seasonal variations more challenging, the spokesman has said.
The four-week moving average, a less volatile measure than the weekly figures, fell to 413,750 last week from 422,250.
The number of people continuing to receive jobless benefits dropped by 17,000 in the week ended July 16 to 3.7 million.
EXTENDED BENEFITS
The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments increased by about 62,400 to 3.76 million in the week ended July 9.
The unemployment rate among people eligible for benefits decreased to 2.9 per cent from three per cent in the prior week, today’s report showed.
Twenty states and territories reported an increase in claims, while 33 reported a decrease. These data are reported with a one-week lag.
Initial jobless claims reflect weekly firings and tend to fall as job growth — measured by the monthly non-farm payrolls report — accelerates.
The economy’s growth slowed in the second quarter to a 1.8 per cent annual rate, following a 1.9 per cent pace in the first three months of 2011, according to the median forecast in a Bloomberg survey ahead of a Commerce Department report tomorrow. Consumer spending likely grew at a 0.8 per cent rate, down from 2.2 per cent in the first three months of the year.
DEBT TALKS
Businesses and consumers also are concerned about the outcome of negotiations between President Barack Obama and Congress to reach a debt-ceiling agreement by August 2 that would avert a US default.
Companies that are cutting jobs include Lockheed Martin Corp The world’s largest defense contractor said on July 19 it’ll offer a voluntary separation plan to 6,500 employees in the US. The Bethesda, Maryland-based company will in mid-August evaluate the need for involuntary reductions.
Tellabs Inc, a telecommunications equipment maker based in Naperville, Illinois, said on July 26 that it will cut 330 jobs or 10 per cent of its workforce over the next year as part of a restructuring plan, while also adding some workers.
The elevated jobless rate remains a major concern for Federal Reserve policy makers, who are likely to keep interest rates close to zero for an extended period to stimulate growth.
“The most recent data attest to the continuing weakness of the labor market,” Fed Chairman Ben S Bernanke said in a statement to lawmakers on July 13. For the economy as a whole, “the pace of the expansion so far this year has been modest.”
