The number of Americans filing applications for unemployment benefits unexpectedly dropped last week to the lowest level in almost two months, adding to signs the labor market in strengthening.
First-time jobless claims fell by 10,000 to 332,000 in the week ended March 9, the fewest since mid January, according to data today from the Labor Department in Washington. The median forecast of 49 economists surveyed by Bloomberg called for an increase to 350,000. The four-week average declined to a five-year low.
Managers are maintaining staffing levels as consumers sustain spending even after a two percentage-point increase in the payroll tax at the start of the year reduced paychecks. Nonetheless, there remains a risk that the recent pickup in employment will be cut short as federal budget cutbacks prompt companies and government agencies to trim payrolls.
“The rate of job destruction is pretty low,” said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida, who projected the number of claims would drop to 338,000. “The labor market is in continued-recovery mode, though there is still a lot of ground to make up.”
Economists’ estimates in the Bloomberg survey ranged from 330,000 to 365,000 claims. The Labor Department revised the number of applications for the prior week to 342,000 from an initially reported 340,000.
Another Labor Department report showed wholesale prices climbed in February by the most in five months, reflecting a jump in energy costs that are now dissipating.
The 0.7% increase in the producer price index followed a 0.2% rise the prior month. The median estimate in a Bloomberg survey of 72 economists called for a 0.7% gain. Excluding volatile food and energy, the so-called core measure advanced 0.2%.
Stock-index futures held earlier gains after the reports. The contract on the Standard & Poor’s 500 Index maturing in June climbed 0.3% to 1,554.6 at 8:47 a.m. in New York.
No states estimated the number of claims last week and there was nothing unusual in the weekly data, a Labor Department official said as the figures were released.
The less-volatile four-week moving average decreased to 346,750, the lowest level since March 2008.
The number of people continuing to receive jobless benefits fell by 89,000 to 3.02 million in the week ended March 2, the fewest since June 2008. The continuing claims figure doesn’t include Americans receiving extended unemployment benefits under federal programs.
Those people collecting emergency and extended payments increased by about 136,500 to 1.92 million in the week ended Feb. 23.
The unemployment rate among Americans eligible for benefits held at 2.4% in the week ended March 2, today’s report showed.
Thirty-seven states and territories reported an increase in claims, while 16 reported a drop. These data are reported with a one-week lag.
Initial jobless claims reflect weekly firings and tend to fall as job growth, measured by the monthly non-farm payrolls report, accelerates.
Employment rose by 236,000 workers last month after a 119,000 gain in January, Labor Department figures showed last week. The median forecast of 90 economists surveyed by Bloomberg projected an advance of 165,000. The jobless rate dropped to 7.7%, the lowest since December 2008, from 7.9%.
Automatic across-the-board federal budget cuts that started taking effect on March 1 may cause some government agencies and companies to pull back in coming months. The reductions, known as sequestration, sum to about $85 billion in spending authority for the fiscal year that ends in September.
“The sequester is another issue,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “Beginning in April, we’ll start to get layoff notices, so we could see some upward bias on new filings because of the sequester, but lawmakers still have time to scale it back.”
“I think we’re setting up for some softening” because of sequestration effects, Sweet said.
Some managers may keep staff lean amid concern growth in the U.S. and globally will cool. Agilent Technologies Inc. of Santa Clara, California, a scientific-testing equipment company, is trimming costs.
“Fiscal year 2013 will be our second year of weak revenue growth and the second year of clamp-down on our expenses, and that includes hiring, very strict hiring controls,” Chief Financial Officer Didier Hirsch said at a March 7 analyst meeting. “Last month, we implemented even deeper cuts and we implemented those deeper cuts as a hedge because of the uncertainty about the world economy.”