Jobless claims decline to lowest level in 5 years
WASHINGTON — Claims for jobless benefits unexpectedly dropped to the lowest level in more than five years, extending swings typical for the month of July.
Applications for unemployment insurance payments declined by 19,000 to 326,000 in the week ended July 27, the fewest since January 2008, from a revised 345,000 the prior week, the Labor Department reported Thursday in Washington.
The median forecast of 50 economists surveyed by Bloomberg called for 345,000. A government analyst said no states were estimated, and the data were still being influenced by the auto plant shutdowns that play havoc with the figures at this time of year.
Businesses have been operating with tight workforces as they wait for signs of a sustained pickup in consumer demand. A slowdown in firings might signal that employers are becoming more confident in the recovery and preparing to expand payrolls, which would encourage household spending, the biggest part of the economy.
“It’s a stronger labor market than anybody thought we’d be seeing this time of year,” said Guy Berger, an economist at RBS Securities Inc. in Stamford, Conn., noting the claims data are affected by auto plant shutdowns that have occurred on a smaller scale this year. “We’re talking about continued decent payroll growth.”
Claims estimates in the Bloomberg survey ranged from 333,000 to 365,000. The Labor Department revised the previous week’s figure to 345,000 from an initially reported 343,000.
Auto plants often shut down in July to retool for the new model year, an activity that causes claims data to become more volatile. Ford idled most of its North American assembly plants for one week this summer instead of two. Three of Chrysler’s assembly plants and all but one of its engine and transmission factories will skip a summer shutdown this year. General Motors hasn’t had a formal summer shutdown since its 2009 bankruptcy.
“Claims for the entire month of July are pretty much a waste because of seasonal issues,” Jacob Oubina, senior economist at RBC Capital Markets in New York, said before the report. “Volatility spikes seriously in this number in early to mid-July. We’ll get cleaner information on claims in the weeks ahead.”
The less-volatile four-week moving average declined to 341,250 last week, a two-month low, from 345,750.
The number of people continuing to collect jobless benefits dropped by 52,000 to 2.95 million in the week ended July 20. That doesn’t include the number of Americans receiving extended benefits under federal programs.
The number of job seekers who’ve exhausted traditional state benefits and are collecting emergency and extended payments decreased by about 52,500 to 1.57 million in the week ended July 13.
Forty-five states and territories reported a decline in claims and seven reported an increase, data that is reported with a one-week lag.
Initial jobless claims measure weekly firings and typically wane before job growth can accelerate.
Payrolls rose by 195,000 workers in June, indicating the U.S. is poised for faster growth as it shakes off the impact of this year’s tax increases and budget cuts. A Labor Department report tomorrow may show employment rose by another 185,000 last month, according to the median estimate of economists surveyed by Bloomberg. The jobless rate fell to 7.5 percent, matching a four-year low, from 7.6 percent in June, economists projected.
The Labor Department projected a 13 percent drop in un- adjusted claims for last week, or about 44,000. Instead, there was a 17.7 percent decrease.
While some companies cut workers, Caterpillar Inc. is requiring employees to take unpaid leave this year as part of a strategy to cut costs amid slowing sales. Those “rolling layoffs” are meant to be temporary, director of investor relations Mike DeWalt said. The company, in Peoria, Illinois, is the largest maker of mining and construction machinery, cut its 2013 earnings forecast this week.
“When economic and construction activities begin to improve in the world, particularly in the U.S. and hopefully, eventually in Europe, it should be a positive for our business,” DeWalt said on a July 24 earnings call.