Claims for unemployment insurance payments in the US unexpectedly fell last week to a four-month low, signaling the recent slowdown in payroll gains was caused by a lack of hiring rather than more firings.
First-time applications for jobless benefits decreased 7,000 in the week ended Saturday to 395,000, the fewest since early April, the labour department said today in Washington. Economists forecast 405,000 claims, according to the median estimate in a Bloomberg News survey. The number of people on unemployment benefit rolls and those getting extended payments also dropped.
Companies have slowed the pace of firings this year even as they have been reluctant to boost hiring, which continues to weigh on consumer spending. Weaker growth, last week’s credit-rating downgrade and uncertainty over reducing deficit-spending may prompt businesses to further delay hiring plans, posing a threat to the recovery.
“We don’t see any more deterioration in the labor market,” said Eric Green, chief market economist at TD Securities Inc in New York, who forecast 390,000 claims. “I don’t see any panic among businesses to shed workers, but you have some reluctance to hire workers.”
Other reports today showed the US trade deficit unexpectedly increased in June to the highest level since October 2008, and consumer confidence dropped last week to the lowest level since mid-May.
Stocks rose and treasures declined after the reports. The Standard & Poor’s 500 Index climbed 1.3 per cent to 1,134.8 at 9.58 am in New York. The yield on the 10-year treasury note increased to 2.17 per cent from 2.11 per cent late yesterday.
The trade deficit widened 4.4 per cent to $53.1 billion from $50.8 billion in May, a report from the commerce department showed today. The deficit exceeded all estimates in a Bloomberg News survey of economists in which the median was $48 billion. Exports declined the most since January 2009.
The Bloomberg Consumer Comfort Index was minus 49.1 in the period to Sunday, down from minus 47.6 the prior week and the second-lowest level in a year. The measure was less than five points away from the record low of minus 54 reached in November 2008, during the depths of the last recession.
Estimates for first-time unemployment claims ranged from 390,000 to 450,000 in the Bloomberg News survey of 48 economists. The labour department revised the prior week’s figure to 402,000 from the initially reported 400,000.
The four-week moving average, a less-volatile measure of initial claims, dropped to 405,000, also the lowest since April, from 408,250.
FAA SHUTDOWN
A labour department official said there were no special circumstances affecting the figures released today. There was no indication last week’s data was influenced by the partial shutdown of the Federal Aviation Administration that has since been resolved.
The number of people continuing to collect jobless benefits dropped by 60,000 in the week ended July 30 to 3.69 million. The decrease was the biggest since February. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 16,000 to 3.7 million in the week ended July 23.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, fell to 2.9 per cent in the week ended July 30, today’s report showed. Forty-four states and territories reported a decrease in claims, while nine had an increase.
WEEKLY FIRINGS
Initial jobless claims reflect weekly firings and tend to fall as job growth — measured by the monthly non-farm payrolls report — accelerates.
The 117,000 increase in July payrolls reported on Friday trails the 133,000 average so far this year. Announced job cuts have increased recently, with planned firings rising 59 per cent last month to 66,414 from a year earlier, according to figures released last week by Chicago-based Challenger, Gray & Christmas Inc.
Slowing job growth and a weakening economy were among reasons cited by Federal Reserve policy makers this week in their decision to keep the benchmark lending rate near zero “at least” through mid-2013.
The recent volatility in financial markets and mounting concern that the recovery will falter as government agencies, businesses and consumers cut spending may prove hurdles to bigger increases in employment.
DEBT DEBATE
“The fear is that all that political uncertainty relating to the debt-ceiling debate and the potential S&P downgrade weighed on business confidence and dampened hiring,” Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, said before the report. “There is a risk that we see an increase in claims because of the fiscal uncertainty.”
The economy grew at a 1.3 per cent pace in the April-June period following revised growth of 0.4 per cent in the first three months of the year that was slower than previously estimated, the commerce department reported last month. Consumer spending rose 0.1 per cent, the smallest gain since the second quarter of 2009, when the recession ended.
Bank of New York Mellon Corp. (BK), the world’s largest custody bank, plans to cut 1,500 jobs, or 3 percent of the workforce, after expenses surged in the second quarter, the bank said yesterday. The company will implement an immediate hiring freeze across most departments and reduce its use of temporary workers, consultants and contractors.
