Fewer Americans filed applications for unemployment benefits last week as a backlog in California’s reporting cleared.
Jobless claims decreased by 10,000 to 340,000 in the week ended Oct. 26 from 350,000 the prior period, the Labor Department reported today in Washington. The median forecast of 49 economists surveyed by Bloomberg called for a decrease to 338,000. California said no claims last week represented applications from prior weeks, a Labor Department spokesman said as the figures were released to the press.
Following swings caused by a change in computer systems in California, claims are settling into a higher range, indicating the 16-day partial federal shutdown this month prompted some non-government employers to dismiss staff. Bigger gains in payrolls are needed to boost wages and revive consumer spending, which accounts for about 70% of the economy.
“The issue for the market is job creation,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, who accurately forecast today’s claims number. “We’re not really making up what we lost during the recession.”
Another report today showed business activity in the U.S. jumped this month, according to the MNI Chicago Report business barometer. The index jumped to 65.9 in October, a nine-year high from 55.7 a month earlier. Readings above 50 signal expansion. The median projection in a Bloomberg survey of economists was 55. The 10-point jump was the biggest in thirty years.
Stocks fell after the Federal Reserve statement yesterday fueled speculation it will cut stimulus in coming months and investors assessed corporate earnings. The Standard & Poor’s 500 Index dropped 0.2% to 1,759.91 at 9:56 a.m. in New York.
The four-week average of claims, a less-volatile measure, rose to 356,250 last week, the highest April, from 348,250.
Federal workers filed about 14,400 claims for jobless benefits two weeks ago, down from about 44,100 the prior period. Those were tallied in a separate category and didn’t influence today’s headline reading.
Economists’ estimates in the Bloomberg survey ranged from 320,000 to 370,000. The prior week’s claims were unrevised.
The number of people continuing to receive jobless benefits rose by 31,000 to 2.88 million in the week ended Oct. 19.
Continuing claims don’t include Americans who have exhausted their traditional state aid and are receiving emergency and extended benefits under federal programs. Those job seekers declined by about 6,700 to 1.32 million in the week ended Oct. 12.
The unemployment rate among people eligible for benefits held at 2.2% in the week of Oct. 19, where it’s been since mid September.
Forty-eight states and territories reported a decrease in claims, while five reported an increase. These data are reported with a one-week lag. Maryland and Virginia were among the states reporting fewer claims two weeks ago, a sign firings among government contractors are subsiding.
No states estimated their data last week, the Labor Department said.
Initial jobless claims reflect weekly firings and typically wane before job growth can accelerate. The government shutdown kept some 800,000 federal employees from working and delayed the Labor Department’s October payrolls report by a week, to Nov. 8.
Yesterday, the Federal Reserve said it needs more evidence of stronger growth before it can dial down its record $85 billion in monthly bond purchases, citing home sales in particular.
“The recovery in the housing sector slowed somewhat in recent months,” the Federal Open Market Committee said at the end of a two-day meeting in Washington. “Fiscal policy is restraining economic growth.”
The central bank left unchanged its statement that it probably will hold its target interest rate near zero “at least as long as” unemployment exceeds 6.5%.
While the economy continues to add jobs, the housing slowdown is rippling through the labor market. Home lenders in particular are feeling the effects of a decrease in refinancing. Bank of America Corp., the second-largest U.S. lender, is cutting jobs in its mortgage division. The financial services company, based in Charlotte, North Carolina, will dismiss about 3,000 people in the fourth quarter.
Wells Fargo & Co., the biggest U.S. mortgage lender, has cut more than 5,700 positions since midyear, and No. 2-ranked JPMorgan Chase & Co. has said it may dismiss 15,000.