Initial claims for unemployment insurance payments in the U.S. fell last week to a level that shows limited improvement in the labor market. Applications for jobless benefits decreased 1,000 in the week ended July 30 to 400,000, the fewest in almost four months, the Labor Department said today in Washington. Economists forecast 405,000 claims, according to the median estimate in a Bloomberg News survey. The four-week average also declined to the lowest level since April. A further reduction in the pace of dismissals may be needed before companies gain the confidence to step up hiring, which has slowed in the past three months. Employers added 85,000 workers in July, economists project a Labor Department report to show tomorrow, failing to reduce a jobless rate that’s holding above 9 percent.
“Claims show some evidence of moving in the right direction, but we’re going to have to see them sustained below 400,000 before we can believe they’re sending a meaningful economic signal,” Carl Riccadonna, senior economist at Deutsche Bank Securities Inc. in New York, said before the report. The number of people on unemployment benefit rolls rose, while those getting extended payments fell, today’s figures showed.
Estimates for first-time claims ranged from 388,000 to 425,000 in the Bloomberg News survey of 47 economists. The Labor Department initially reported the prior week’s applications at 398,000. The four-week moving average, a less-volatile measure of initial claims, dropped to 407,750 from 414,500. The average has declined for five straight weeks.
A Labor Department official today said there were no special factors that had an impact on the figures released today. He said there was no indication last week’s data reflected a partial shutdown of the Federal Aviation Administration. The agency had to furlough workers because Congress failed to approve short-term funding for the agency. Transportation Secretary Ray LaHood said the inability to resolve the deadlock over spending authorization for the Federal Aviation Administration has idled about 70,000 construction workers and 4,000 agency employees. The number of people continuing to collect jobless benefits rose by 10,000 in the week ended July 23 to 3.73 million. Economist forecast the number would increase to 3.7 million. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 42,000 to 3.72 million in the week ended July 16. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3 percent in the week ended July 23, today’s report showed. Forty-eight states and territories reported a decrease in claims, while five had an increase. Initial jobless claims reflect weekly firings and tend to fall as job growth — measured by the monthly non-farm payrolls report — accelerates. Sluggish job growth raises the risk consumer spending, which makes up 70 percent of the economy, will struggle to accelerate in the last half of 2011.
The economy grew at a 1.3 percent pace in the April-June period following revised growth of 0.4 percent in the first three months of the year that was slower than previously estimated, the Commerce Department reported last week. Consumer spending rose 0.1 percent, the smallest gain since the second quarter of 2009, when the recession ended.
The projected increase in July payrolls trails the 126,000 average so far this year. Announced job cuts have increased recently with companies including Cisco Systems Inc., Boston Scientific Corp. and Merck & Co. announcing they’re paring their workforces.
Cisco, the largest networking-equipment maker, plans to eliminate about 6,500 jobs, or 9 percent of its full-time global workforce, to help trim $1 billion in annual costs and step up profit growth. The company said on July 18 that affected workers in the U.S. and Canada will be notified that week. Boston Scientific, the second-largest maker of implanted heart devices, said July 28 it will eliminate 1,200 to 1,400 jobs by the end of 2012 to trim costs and raised its full-year profit forecast. The shares rose the most since March 10, 2009. Merck, the second-largest U.S. drugmaker, plans to cut 12,000 to 13,000 jobs by 2015, expanding a restructuring program to save as much as $4.6 billion a year. The Whitehouse Station, New Jersey-based company will continue to hire in growth areas such as emerging markets, spokesman David Caouette said July 29.
Source: Alex Kowalski (Bloomberg)