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Fewer-than-anticipated first-time claims for unemployment benefits were filed last week as U.S. businesses shied away from further cuts at the end of the year.
Initial jobless claims dropped by 22,000 to 432,000 last week, the lowest level since July 2008, the U.S. Labor Department said today (Thursday). And the less volatile four-week moving average fell by just 5,500 to 460,250. This is significant because the drop is seen by economists as a more accurate gauge since it irons out week-to-week volatility in the data.
Job cuts tend to wane during the week of the Christmas holiday, and most economists contend that claims must fall below 400,000 before the U.S. economy can begin to create jobs. But the numbers still offer a reason for optimism.
"It's boding well for outright job growth," Stephen Gallagher, chief U.S. economist at Societe Generale SA (OTC ADR: SCGLY) told Bloomberg News. "It seems that some of the layoffs that took place in the early part of the year were excessive," said Gallagher, who forecast claims would drop to 430,000.
Continuing jobless claims fell by 8.9%, or 57,000 to 4.98 million – the lowest level since February. Of course, continuing claims do not include millions of people that have exhausted the regular 26 weeks of benefits normally provided by states and are now receiving extended benefits paid by the federal government for up to 73 additional weeks.
The drop in continuing claims was the largest four-week drop since 1987, analysts at JPMorgan Chase & Co. (NYSE: JPM) noted. That led some economists to contend that the decline is more reflective of expiring benefits instead of actual hiring. That would confirm what Money Morning and other analysts have termed a jobless recovery.
"Despite their substantial improvement from the highs reached earlier in the year, jobless claims join many other indicators in suggesting that the official government payroll data have been overstating the degree of improvement in the labor market," Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. told the Financial Times.
Still, others on the front lines of the employment battle see signs of good things to come.
"What we've seen is definite stability and just a hint toward things trying to get better," Jeffrey Joerres, chief executive officer of Manpower Inc. (NYSE: MAN), the world's second-largest provider of temporary workers, said in a Bloomberg Television interview.
His company is experiencing "slow but steady increases in people who are out on assignment," he said. "It's a little in every office, which is a good sign because it's broad-based."
Economists will keep a close watch on next week's report to determine if the labor market can turn the corner and begin to add jobs. The states with the biggest declines in jobless claims last week were Tennessee, Illinois, Pennsylvania and Georgia.
"Jobless claims have been trending lower for much of the year and are now close to levels that have historically signaled a bottoming out in the labor market," John Ryding and Conrad DeQuadros, economists at RDQ Economics told the FT.
News & Related Story Links:
- Bloomberg News:
U.S. Jobless Claims Drop to Lowest Level Since 2008
- Money Morning:
Jobless Recovery Topic
- Financial Times:
US jobless claims fall to 17-month low