Drop in U.S. jobless claims points to healing in labor market

WASHINGTON Thu Jul 10, 2014 10:33am EDT

People attend a job fair in Detroit, Michigan March 1, 2014. REUTERS/Joshua Lott

People attend a job fair in Detroit, Michigan March 1, 2014.

Credit: Reuters/Joshua Lott

WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits fell last week to one of its lowest levels since before the 2007-09 recession, a sign of increasing health in the labor market.

Other data on Thursday showed a rise in business inventories during May, bolstering expectations the economy was bouncing back from a weak first quarter.

Initial claims for state unemployment benefits dropped by 11,000 to a seasonally adjusted 304,000 for the week ended July 5, the Labor Department said. Economists had expected no change in the number of first-time applications for jobless aid.

The readings had little impact on financial markets, as U.S. stocks and government debt yields fell over concerns about Italy's economy and the health of Portugal's top-listed bank.

Employers slashed their payrolls during America's deep recession, but the long cycle of aggressive layoffs now appears over.

The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, declined by 3,500 to 311,500 last week. That was the second-lowest reading for the moving average since August 2007. After falling steadily for several years, the moving average has been largely unchanged since the spring.

The labor market is still not fully healed. Firms have been more reticent about hiring, although companies added 288,000 jobs to their payrolls in June and the unemployment rate fell to 6.1 percent, closing in on a six-year low.

"The labor market is firming up," said Stephen Stanley, an economist at Pierpont Securities in Stamford, Connecticut.

Stanley cautioned against reading too deeply into last week's claims data because many factories shut down for parts of July to retool, often making claims data during the month volatile.

The Labor Department said there were no special factors influencing the state level data.

Separately, the Commerce Department said wholesale inventories rose 0.5 percent in May, just below economists' expectations for a 0.6 percent increase.

The gains were driven by increases in inventories of metals, autos, machinery and lumber.

Inventories are a key component of gross domestic product changes. The component that goes into the calculation of GDP - wholesale stocks excluding autos - increased 0.3 percent in May.

A sharp slowdown in the pace of restocking by businesses helped to sink economic growth in the first quarter, but a swing in inventories is expected in the April-June period.

The economy contracted at a 2.9 percent annual pace in the January-March period, with inventories playing a big role in the decline. Many analysts forecast growth in the second quarter to rebound to at least a 3 percent pace.

(Reporting by Jason Lange; Editing by Paul Simao)

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Comments (16)
Bighammerman wrote:
More twisted truth from the Obama administration prior to election time. Those who believe that things are getting better are Obama buffoon’s who can’t admit they made a big mistake when they voted for Obama. Obama has created domestic and global disasters with his CHANGE. It is costing many lives of children who die trying to illegally cross our southern boarders yet Obama continues his quest to bring our country down. Congress needs to remove Obama from office now.

Jul 10, 2014 8:58am EDT  --  Report as abuse
Marla wrote:
It’s not only about how many are working, but also the quality of the jobs available. We are becoming a nation of part-time workers! Corporations in their rabid quest to increase profits and shareholder’s earnings hire part-time over full time because they don’t have to offer benefits to those who do not work full time.

Jul 10, 2014 9:30am EDT  --  Report as abuse
BeRealistic wrote:
A couple of notes that should also be considered on this topic. First is read beyond the headlines, this is actually one of Reuter’s better articles.

In the body of the article, “Stanley cautioned against reading too deeply into last week’s claims data because many factories shut down for parts of July to retool, often making claims data during the month volatile.”

“Employers slashed their payrolls during America’s deep recession, but the long cycle of aggressive layoffs now appears over.” – After such an economic disaster and widespread layoffs, at some point they have to ease simply because there is a minimum required workforce to maintain the businesses that are still operating. One needs to look a the number of quality jobs created and the number of long term unemployed. This article touches on both stating jobs have increased but as noted in a Reuter’s article yesterday, wages are stagnant and as noted recently numerous times, the service sector is the greatest growth sector and that is not so great. The article also states that the number receiving longer term benefits almost exactly offsets the reduced first time filers, also making for less than happy analysis.

The last concern that the article did not even mention that I find intentionally misleading, is that last week was a holiday and claims offices were closed on Friday making for a short week. When a short week affects good news, it is always noted, but not when it might deflate this seemingly positive report. In addition to the Friday closure, having had significant experience with government workforce, I am certain that most employees were “checked out” physically or mentally, by lunch on Thursday, lending at least another half day shortage. It will be interesting to see the numbers next week, I suspect we will see a significant spike due to those claims not able to be processed due to 7/4 holiday.

Jul 10, 2014 9:53am EDT  --  Report as abuse
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