The fewest workers applied for U.S. unemployment benefits over the past month since before the last recession, indicating the labor market is making progress.
The number of claims in the four weeks ended Aug. 3 declined to 335,500 on average, the least since November 2007, a Labor Department report showed today in Washington. Compared with a week earlier, claims rose by 5,000 to 333,000, in line with the median forecast of 50 economists surveyed by Bloomberg.
The level of firings is settling into a lower range following swings in July caused by annual auto plant shutdowns, showing employers want to hold on to workers to meet sales. That may be a precursor to a pickup in hiring, which will sustain household spending, the biggest part of the economy, and underpin growth in the second half of 2013.
“We’ll continue to see improvement,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, the third-best claims forecaster over the past two years, according to data compiled by Bloomberg. “It’s more important to put the emphasis on the trend in claims, which remains favorable.”
Stocks rose, after the Standard & Poor’s 500 Index capped its first three-day slide since June 12, after the figures and as China’s trade data topped forecasts. The S&P 500 increased 0.1% to 1,692.94 at 10:13 a.m. in New York.
No states were estimated, and there was nothing unusual in the state data last week, a Labor Department spokesman said as the figures were released to the press.
Auto plants often shut down to retool for the new model year, causing claims data to become more volatile in July.
Growth in the automobile industry may help employment. Automakers, enjoying the best U.S. sales since 2007, this week disclosed plans to spend $434 million to boost capacity. Ford Motor Co. said it’s looking to squeeze more vehicles out of every North American factory. Chrysler Group LLC yesterday said it will add capacity and almost 300 jobs at a Michigan engine plant.
Economists’ estimates in the Bloomberg survey ranged from claims of 315,000 to 370,000, leading to a median forecast of 335,000. The Labor Department revised the previous week’s figure from an initially reported 326,000.
The number of people continuing to receive jobless benefits rose by 67,000 to 3.02 million in the week ended July 27. The continuing claims figure does not include the number of Americans 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 48,800 to 1.52 million in the week ended July 20.
The unemployment rate among people eligible for benefits held at 2.3% in the week ended July 27, today’s report showed.
Forty-five states and territories reported a decline in claims, while eight reported an increase. These data are reported with a one-week lag.
Initial jobless claims reflect weekly firings and typically wane before job growth can accelerate.
Payrolls rose by 162,000 workers in July, the fewest in four months, following a 188,000 increase in June, data showed last week. The jobless rate dropped to a more than four-year low of 7.4% from 7.6%.
“Claims don’t have to fall very far to make a meaningful difference to payrolls,” Ian Shepherdson, chief economist at Pantheon Macroeconomics Inc. in White Plains, New York, said in a research note. Every 10,000 decline in applications that is sustained over a month is roughly equivalent to a 25,000 increase in the pace of payroll gains, he said. “These data need to be watched.
Another report from the Labor Department this week showed job openings rose in June to the highest level in five years. It also showed fewer workers were fired in June than at any time in the previous five months, indicating demand is strong enough for companies to retain current staff.
Federal Reserve policy makers are watching the job market to determine when to begin scaling back the central bank’s $85 billion in monthly bond purchases. Officials have said they will continue the program until the labor market has improved “substantially.”
The economy will expand at a 2.5% annualized rate from July through December, up from a 1.4% gain in the first six months of 2013 and little changed from the pace projected last month, according to a Bloomberg survey of 59 economists conducted Aug. 2 to Aug. 6.
Economists in the survey also projected unemployment will drop to 7% by the middle of 2014, matching the timeline Fed Chairman Ben S. Bernanke laid out in predicting when the monthly bond purchases will end.
Companies trimming their workforce include Bank of America Corp., the second-largest U.S. lender. The Charlotte, North Carolina-based company told Pennsylvania regulators that it will cut 209 jobs from a unit servicing troubled mortgages by Sept. 30, according to a notice released Aug. 5 on the Pennsylvania Department of Labor website.
Reductions in federal government spending, or the so-called sequestration, also may affect the labor market. The Pentagon is reducing to six from 11 the furlough days that 651,542 of its civilian employees must take this fiscal year because of automatic budget cuts, Defense Secretary Chuck Hagel said.