BackUS jobless claims unexpectedly drop to 8-year low
Jobless claims fell by 19,000 to 284,000 in the week ended 19 July, the fewest since February 2006
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Washington: The number of Americans filing applications for unemployment benefits unexpectedly dropped last week to the lowest level in more than eight years.
Jobless claims fell by 19,000 to 284,000 in the week ended 19 July, the fewest since February 2006 and lower than any economist surveyed by Bloomberg forecast, a labour department report showed on Thursday in Washington. Applications can be volatile at this time of year because of auto plant shutdowns, even as state data showed nothing inconsistent with prior years, a labour department spokesman said as the data was released to the press.
Fewer claims signal employers are reluctant to let go of staff as the talent pool shrinks and sales improve. A tightening labor market could lift wages and spur consumer spending, which accounts for about 70% of the economy.
Companies have been running with very tight labour force levels and now as demand starts to pick up, businesses are finding themselves in some cases very labor constrained, Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. As we start to see the demand continue to improve, we will start to see wage gains percolate.
Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in September climbed 0.2% to 1,984.2 8:34 am in New York.
The median forecast of 50 economists surveyed by Bloomberg projected 307,000 claims would be filed last week. Estimates ranged from 295,000 to 320,000. The labour department revised the prior week’s reading to 303,000 from an initially reported 302,000.
Auto shutdowns
While the labour department spokesman said there was nothing unusual in the figures and no states were estimated, the timing and extent of closings to re-tool auto factories for the new model year is typically difficult for the government to gauge, causing claims to gyrate at this time of year. It will probably take several weeks for the data to stabilize enough to signal whether firings are truly ebbing.
Michigan, New Jersey and Ohio were among states that reported the biggest decrease in claims in the week ended 12 July amid fewer firings in manufacturing and transportation industries. That may indicate more auto plants than usual remained open this year to meet improving demand.
Today’s jobless claims data likely informs us more about production than employment, Neil Dutta, head of US economics at Renaissance Macro Research LLC in New York, said in a note after the report. Auto production is in overdrive at a time when factories are normally shutdown to retool for new makes and models. We would expect a significant pick-up in motor vehicle production and manufacturing employment in July.
The four-week average of jobless claims, considered a less volatile measure than the weekly figure, decreased to 302,000, the lowest since May 2007, from 309,250 in the prior week.
The number of people continuing to receive jobless benefits declined by 8,000 to 2.5 million in the week ended 12 July, the fewest since June 2007. The unemployment rate among people eligible for benefits held at 1.9%, Thursday’s report showed. These data are reported with a one-week lag.
Employers added 288,000 jobs in June, lifting the average monthly advance so far in 2014 to almost 231,000. If that pace is sustained, it would be the best year since 1999.
The unemployment rate dropped last month to an almost six- year low of 6.1%.
Consumer spending
A strengthening labour market is leading consumers to increase spending, spurring transactions at Bank of America Corp. The Charlotte, North Carolina-based bank saw an 8% growth in credit and debit card volumes and increased balances since the first quarter.
While the economy still faces challenges, progress is being made throughout the economy but also throughout our company. said Brian Moynihan, Bank of America Corp.’s chief executive officer during a second quarter earnings call on 16 July. As we have strong positions, leadership positions across consumer and commercial companies in America, we have a view into the key indicators of an improving economy, which show signs everywhere of improvement. BLOOMBERG
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