Fewer Americans than forecast filed applications for unemployment benefits last week, a sign the job market continues to strengthen.
Jobless claims declined by 11,000 to 304,000 in the week ended July 5, the fewest in more than a month, a Labor Department report showed today in Washington. The median forecast of 45 economists surveyed by Bloomberg called for 315,000. There was nothing unusual in the data and no states were estimated, a spokesman said as the figures were released.
Combined with data last week that showed payrolls exceeded expectations in June and the unemployment rate fell to an almost six-year low, the drop in firings signals a rebound in second-half economic growth. As demand improves, employers will probably take on more workers, helping to lift consumer spending, which accounts for about 70 percent of the economy.
“The declining trend in claims is very encouraging, and is further evidence that the strong payrolls number we saw for June is not a fluke,” said Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, and the most accurate forecaster of jobless claims in the past two years, according to data compiled by Bloomberg. “The labor market is gaining momentum. This is consistent with strong gains in consumer spending.”
Stock-index futures held earlier losses after the report. The contract on the Standard & Poor’s 500 Index maturing in September dropped 0.9 percent to 1,950.1 at 8:44 a.m. in New York as Federal Reserve Bank of St. Louis President James Bullard said the central bank may raise interest rates sooner than investors expect.
Economists’ estimates in the Bloomberg survey ranged from claims of 300,000 to 350,000. The previous week’s figure was unrevised at 315,000.
The four-week moving average, a less volatile measure than the weekly figures, dropped to 311,500 last week from 315,000.
The data may soon turn volatile as the annual auto-plant shutdowns to retool equipment for the new model year take place, said Ian Shepherdson, chief economist at Pantheon Macroeconomics Inc. in White Plains, New York.
“Sooner or later - presumably next week - the auto shutdowns will hit the claims data, so we have to expect substantial near-term volatility, though today’s report likely is a reasonable reflection of the favorable underlying trend, Shepherdson said in an e-mailed note.
The number of people continuing to receive jobless benefits rose by 10,000 to 2.58 million in the week ended June 28.
The figures bear out Fed policy makers who said the job market will continue to improve gradually, according to minutes of their June meeting released yesterday.
“Most participants projected the improvement in labor market conditions to continue, with the unemployment rate moving down gradually over the medium term,” the minutes showed.
The unemployment rate among people eligible for benefits held at 2 percent in the week ended June 28, according to today’s report.
Initial jobless claims reflect weekly firings and typically wane before job growth can accelerate.
The number of applications is unlikely to keep dropping as unemployment claims around 300,000 are close to a record low relative to the overall level of employment, according to Jim Paulsen, the Minneapolis-based chief investment strategist for Wells Capital Management. In the early-1970s, when applications dropped below 300,000, payrolls were only about half of what they are now, so 300,000 claims at that time would be equivalent to about 600,000 today, he said.
“It is no longer necessary for claims to trend lower every week to signal solid economic growth,” Paulsen said in a note in June. “Indeed, economic health may continue to improve and accelerate even if claims remain in a sideways channel.”
Payrolls expanded by 288,000 workers in June following a 224,000 gain the prior month that was bigger than previously estimated, Labor Department figures showed on July 3. The jobless rate dropped to 6.1 percent from 6.3 percent.
Companies such as Dearborn, Michigan-based Ford Motor Co. are adding to staffing levels. The second-biggest U.S. automaker predicts it may beat a 2011 plan to bring on 12,000 new workers by 2015.
Germany’s largest bank, Deutsche Bank AG, this week said it plans to hire about 500 employees in the U.S. in compliance, risk and technology as global securities firms bolster their regulatory oversight in the wake of escalating fines.
The fifth anniversary of the U.S. economic expansion will probably usher in a nine-month period of growth in excess of 3 percent, a Bloomberg survey of economists shows. Gross domestic product will expand 3.1 percent from July through December following a 3.3 percent advance last quarter, according to the median forecast of 74 economists polled from July 3 through July 9. It would be the first time since 2004-2005 that GDP has sustained such gains over an extended period.
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