Labor market data suggest economy strengthening

WASHINGTON Thu Jan 9, 2014 11:36am EST

Job seekers listen to a presentation at the Colorado Hospital Association health care career fair in Denver April 9, 2013.REUTERS/Rick Wilking

Job seekers listen to a presentation at the Colorado Hospital Association health care career fair in Denver April 9, 2013.

Credit: Reuters/Rick Wilking

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WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits last week fell and planned layoffs hit a 13-1/2 year low in December, adding to a range of data that have suggested the economy is gaining steam.

Initial claims for state unemployment benefits dropped 15,000 to a seasonally adjusted 330,000 in the week ended January 4, the Labor Department said on Thursday. Economists had expected them to fall to just 335,000.

Claims are typically volatile around this time of the year because of the weather and the difficulties adjusting the data for unusual and shifting layoff patterns around the holidays.

Still, they have been largely consistent with other labor market indicators that have painted an upbeat picture of the jobs market and the overall economy.

"The labor market seems to have picked up some steam towards the end of the year," said Guy Berger, an economist at RBS in Stamford, Connecticut.

Separately, consulting firm Challenger, Gray & Christmas said planned layoffs at U.S. firms plunged by 32 percent in December to the lowest level since June 2000.

The reports helped to lift U.S. stocks, although the dollar was little changed against a basket of currencies and prices for U.S. government bonds rose only slightly.

From employment to consumer spending and industrial production, the economy appears poised for sustained strong growth in 2014 after false starts in prior years.

The brightening outlook gave the Federal Reserve confidence last month to announce that it would reduce its monthly pace of bond purchases to $75 billion from $85 billion.

With the run of fairly strong data continuing, economists believe the U.S. central bank will announce a further reduction at its next meeting on January 28-29.

In an interview with Time magazine released on Thursday, incoming Fed Chair Janet Yellen said she was "hopeful" that economic growth would accelerate in 2014 to reach 3 percent or more, with inflation moving up toward the central bank's target.

Economists think U.S. GDP growth may not have even reached 2 percent last year.

SOLID DECEMBER PAYROLLS EYED

The jobless claims data for last week has no bearing on the government's closely watched employment report for December, given that it falls outside of the payroll survey period.

The Labor Department is expected to report on Friday that non-farm payrolls increased by 196,000 last month after gaining 203,000 in November, according to a Reuters poll of economists.

There is, however, a risk of a stronger number. Private-sector hiring hit its fastest pace in 13 months in December, while small businesses created the most jobs in nearly eight years, according to reports on Wednesday.

"The underlying trend is encouraging," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. "Job creation is picking up momentum."

The claims data showed the number of people still receiving benefits under regular state programs after an initial week of aid rose 50,000 to 2.87 million in the week ended December 28.

A total of 4.19 million people were receiving benefits under all programs in the week ended December 21. With benefits for more than a million long-term unemployed Americans having expired on December 28, that figure should decline sharply in the weeks ahead.

Economists believe the expiration of the benefits will lower the unemployment rate as former aid recipients either accept jobs they previously would not have considered or drop out of the labor force.

(Reporting by Lucia Mutikani, additional reporting by Steven C Johnson in New York; Editing by Paul Simao)

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Comments (21)
Bakhtin wrote:
Lets wait for the predictable “The figure is fake, The real unemployment figure is blah blah blah” comment.

Obama’s success is killing the GOP.

Jan 09, 2014 8:48am EST  --  Report as abuse
gcf1965 wrote:
Bakhtin, can we agree that the labor force is considerably smaller than historically it has been? As the labor force becomes smaller, it is not surprising to see fewer claims. I am not saying the sky is falling, but I am saying that as there are fewer people working, it follows that there are fewer who are going to lose jobs and file claims. You and Flash and Alkaline, and US fail to look at teh whole picture and want to focus only on a single piece of news that fits your narrow and unrealistic view of what is happening. What you fail to take into account is number of people now out of labor force, number of people working far below a recent position, number of hours people are working the disappearance of sustainable jobs, and the time it is taking to find work after college graduation. As a moment in time, this is good news, in the big picture, it means very little

Jan 09, 2014 9:34am EST  --  Report as abuse
Crash866 wrote:
The ADP report comes two days ahead of the government’s nonfarm payroll report, a measure of the labor market that is more comprehensive and includes both public and private sector employment. Analysts are looking for 196,000 jobs to have been added in December, along with a rise in private payrolls of 195,000. Both numbers would represent slight declines from November.

Jan 09, 2014 10:07am EST  --  Report as abuse
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