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The number of Americans filing new claims for unemployment benefits dropped to its lowest level in nearly 5-1/2 years last week, signalling labour market resilience in the face of fiscal austerity.
Initial claims for state unemployment benefits fell 4,000 to a seasonally adjusted 323,000, the lowest level since January 2008, the US Labor Department said on Thursday.
The third weekly decline, which confounded economists' expectations for a rise to 335,000 last week, showed layoffs remained contained even as other parts of the economy such as manufacturing show strain from belt-tightening in Washington.
“The labour market is strengthening and the mandatory spending cuts from Washington have not made business more cautious when it comes to their hiring plans,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
Coming on the heels of data last week showing surprising strength in the labor market, the claims report could help to further ease fears of an abrupt slowdown in economic activity early in the second quarter.
Employers added 165,000 new jobs to their payrolls in April and hiring in the previous two months was stronger than initially reported. The unemployment rate dropped to a four-year low of 7.5 per cent.
Stocks on Wall Street opened lower, pausing for breath after a sustained rally that took the broader Standard & Poor's 500 index to record closing highs for five straight sessions.
The dollar rose against a basket of currencies, while US Treasury debt price were little changed.
<B>Growth slowdown seen temporary</B><BR>
A US Labor Department analyst said no states had been estimated last week and there was nothing unusual in the state-level data.
The four-week moving average for new claims — a better gauge of job market trends — dropped 6,250 to 336,750, the lowest level since November 2007, just before the economy slipped into recession.
The improvement in employment contrasts sharply with other data, including retail sales and manufacturing, that have suggested a cooling in the economy at the end of the first quarter, which persisted early in the April-June period.
“This suggests that companies see the slowing in growth as somewhat temporary, and are responding to it by reducing hours worked and hiring at a less rapid pace rather than increasing the pace of layoffs,” said Dean Maki, chief US economist at Barclays in New York.
Separately, a number of top US retailers reported disappointing April sales as consumers, whose incomes have been reduced by tax increases, gravitated toward discount chains.
That suggests April could be another weak month for retail sales.
Costco Wholesale Corp and Victoria's Secret parent L Brands Inc reported smaller-than-expected sales gains. In contrast, so-called off price chains TJX Cos Inc, which operates T J Maxx and Marshalls, and Ross Stores Inc both easily beat Wall Street forecasts.
The slowdown in activity after the economy expanded at a 2.5 per cent annual pace in the first three months of the year has been blamed on higher taxes which went into effect on January 1 and $85 billion in government budget cuts known as the “sequester”.
The claims report showed the number of people still receiving benefits under regular state programmes after an initial week of aid dropped 27,000 to 3.0 million in the week ended April 27. That was the lowest level since May 2008.
BUSY AGAIN
- Initial claims for state unemployment benefits in the US fell 4,000 to a seasonally adjusted 323,000, the lowest level since January 2008
- Employers added 165,000 new jobs to their payrolls in April
- The unemployment rate dropped to a four-year low of 7.5 per cent
- The four-week moving average for new claims dropped 6,250 to 336,750, the lowest level since November 2007
