Fewer Americans than projected filed applications for unemployment benefits last week, reflecting a smaller number of factory closings for this time of year.
Initial jobless claims dropped by 29,000 to 429,000 in the week ended July 10, the fewest since August 2008, Labor Department figures showed today in Washington. The government anticipates an increase in temporary factory layoffs in early July that did not occur this year, leading to the decrease in applications, a Labor Department spokesman said.
“The key story here is the extreme uncertainty over the near-term path of claims as a result of the annual retooling shutdowns, which throw the seasonal adjustments into chaos,” Ian Shepherdson, chief U.S. economist at High Frequency Economics LLC in Valhalla, New York, said before the report. Shepherdson projected claims would drop to 420,000.
It may take another week or two before the claims figures reflect the true underlying trend, the Labor Department spokesman said. Other employment data signal the job market will take time to pick up, restraining consumer spending, the biggest part of the economy.
“The labor market is still improving, but at a slower rate than desired,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “Companies are still cautious about hiring at this point because there are still some lingering concerns about the strength of the economy in the second half of this year.
Manufacturing in the New York region expanded in July at the slowest pace this year as measures of orders and sales cooled, a report from the Federal Reserve Bank of New York also showed today. The bank’s general economic index dropped to 5.1, lower than the median forecast of 18 in a Bloomberg News survey of economists. Readings greater than zero signal expansion in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.
Wholesale prices in the U.S. dropped in June more than forecast, pulled down by lower energy and food costs, a sign that the economy is recovering without inflation, another report from the Labor Department showed today.
The 0.5 percent decline in prices paid to factories, farmers and other producers followed a 0.3 percent drop in May. Excluding food and fuel, so-called core prices climbed 0.1 percent, matching the median estimate of economists surveyed by Bloomberg News.
Stock-index futures trimmed earlier gains after the reports on concern manufacturing is slowing. The contract on the Standard & Poor’s 500 Index rose 0.1 percent to 1,092.5 at 8:55 a.m. in New York. Treasury securities were little changed.
Applications were projected to drop to 445,000, according to the median forecast of 41 economists surveyed. Estimates ranged from 395,000 to 470,000. The Labor Department revised the prior week’s figure up to 458,000 from 454,000.
The four-week moving average, a less volatile measure than the weekly figures, fell to 455,250 last week from 467,000, today’s report showed.
The number of people continuing to receive jobless benefits jumped by 247,000 in the week ended July 3 to 4.68 million.
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 255,000 to 4.32 million in the week ended June 26, after Congress failed to pass legislation extending the assistance. The Labor Department estimates about 3.3 million people will fall off extended-benefit rolls by the end of July if Congress doesn’t pass emergency legislation.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 3.7 percent in the week ended July 3, from 3.5 percent in the prior week.
Twenty-three states and territories reported a decline in claims, while 30 reported an increase. 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. That relationship has broken down in recent months as some companies continue to cut staff, while others expand, pointing to an uneven recovery.
The timing of the traditional summer auto-plant shutdowns to retool equipment for new models is playing a role in the drop in claims. General Motors Co. said June 17 most of its U.S. plants will remain open during the traditional shutdowns, a move that economists said could lower claims because some temporarily suspended workers usually applied for benefits.
The Labor Department spokesman said the decrease in factory shutdowns this time of year widespread, signaling it was not just auto plants.
Federal Reserve policy makers, who trimmed 2010 growth forecasts, were concerned about lingering high unemployment and the low pace of hiring, minutes of their June meeting showed yesterday.
“The economic outlook had softened somewhat,” according to minutes of the Fed’s meeting, at which policy makers restated a pledge to keep interest rates near zero for an extended period. “Participants expected the pace of hiring to remain low for some time,” as “employers were still cautious.”
The economy lost more than 8 million jobs during the recession that began in December 2007, the biggest employment slump in the post-World War II era. The unemployment rate, which reached a 26-year high of 10.1 percent in October 2009, will average 9.6 percent this year, according to a Bloomberg survey taken July 1 to July 8.
A lack of jobs and a loss of wealth is limiting consumer spending. A Commerce Department report yesterday showed retail sales fell more than projected in June, the second consecutive decline.
Whitehouse Station, New Jersey-based Merck & Co. is among companies paring staff. The drugmaker last week said it’ll shut eight research labs and eight manufacturing plants to cut 15,000 jobs globally as part of a previously announced plan. The move follows Merck’s acquisition of Schering-Plough Corp. last year.