Fewer Americans filed applications for unemployment benefits last week than at any time since before the last recession, indicating bigger gains in hiring will soon follow.
Jobless claims decreased by 32,000 to 300,000 in the week ended April 5, the least since May 2007, seven months before the worst economic slump in the post-World War II era began, a Labor Department report showed today in Washington. Another report showed rising gasoline prices were hurting consumer sentiment.
A drop in firings signal employers are optimistic sales will pick up following a weather-related slowdown at the start of the year, which will pave the way for bigger increases in employment as demand rebounds. More jobs and growing incomes would help lift confidence and provide a spark for consumer spending, which makes up the largest part of the economy.
“I’m pretty optimistic about the labor market,” said Thomas Simons, a money market economist at Jefferies LLC in New York, whose forecast for 310,000 claims was the lowest in the Bloomberg survey. “Slack in the labor force should start to be absorbed more quickly, and that should put some upward on wages as well.”
Stocks slumped, with the Nasdaq Composite Index sinking the most since 2011, as technology shares resumed a selloff on concern valuations are too high. The Nasdaq Composite fell 3.1 percent at 4 p.m. in New York. The Standard & Poor’s 500 Index lost 2.1 percent to 1,833.09.
Elsewhere today, there was additional evidence that the world’s second-largest economy was cooling. China’s exports and imports unexpectedly fell in March, according to figures from the customs administration in Beijing.
The U.S. should lead global growth this year thanks to a longer period of record-low interest rates orchestrated by the Federal Reserve, stronger private demand and the end of a fiscal drag that slowed economic improvement in 2013, the International Monetary Fund said earlier this week.
The drop in jobless claims was larger than the most optimistic forecast in a Bloomberg survey of 52 economists. The median estimate called for 320,000, with estimates ranging from 310,000 to 330,000. The prior week’s figures were revised up to 332,000 from an initial reading of 326,000.
In another report today, consumer confidence declined last week to a two-month low as rising fuel prices caused Americans’ views to sour.
The Bloomberg Consumer Comfort Index (COMFCOMF) fell to minus 31.9 in the period ended April 6 from minus 30 the prior week as views on the economy, family budgets and the buying climate all deteriorated. Perceptions of personal finances turned negative for the second time in three weeks, dropping to the lowest level since early November.
“Rising gasoline costs and falling equity prices are likely exerting a gravitational pull on consumer sentiment,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. Both the lower and upper ends of the income scale “showed some visible discomfort due to declines in discretionary spending power,” he said.
Since jobless claims can be volatile, it’s important that last week’s drop is sustained. Because the Easter holidays occur at different times from year to year, it’s difficult for the Labor Department to adjust the data for seasonal variations.
“It’s even riskier than usual to put too much weight on single observations at this time of year,” Ian Shepherdson, chief economist at Pantheon Macroeconomics Inc. in White Plains, New York, wrote in a research note. “We need to see a few more weeks’ numbers before we can be sure where the trend now stands. Our core view is that claims are drifting gently downwards, consistent with our view that payroll gains are set to pick up.”
Even smoothing through the ups and downs, the news remained upbeat. The four-week average of claims, a less-volatile measure, fell to 316,250 -- the lowest since the end of September -- from 321,000 the week before. Excluding the period last year when a change in computer systems caused a delay in processing applications in California, the average would have been the lowest since October 2007.
The number of people continuing to receive jobless benefits decreased by 62,000 to 2.78 million in the week ended March 29, the lowest since January 2008, today’s report also showed.
Initial jobless claims reflect weekly firings and typically decline before job growth picks up speed.
Further improvement in the labor market will probably help sustain spending. Payrolls, excluding those at government agencies, rose by 192,000 workers in March after a 188,000 gain the previous month that was larger than first estimated, the Labor Department said last week. Private employment exceeded the pre-recession peak for the first time.
The jobless rate held at 6.7 percent last month as an increase of about 500,000 people into the workforce was matched by a similar gain in employment, last week’s report also showed.
Figures last week showed consumer spending is rebounding from weather-depressed levels. Cars and light trucks sold in March at a 16.3 million annualized rate, the fastest since May 2007, following a 15.3 million pace the prior month. Purchases at General Motors Co. (GM), Ford Motor Co., Toyota Motor Corp., Nissan Motor Co. and Chrysler Group LLC all topped analysts’ estimates.
U.S. economic growth is projected to reach 2.7 percent this year, according to a Bloomberg survey of economists, supporting the Fed’s outlook that the economy has improved enough to continue unwinding its bond-buying program.
The central bank announced last month a $10 billion reduction in monthly bond buying to $55 billion and repeated that it will taper purchases “in further measured steps.” The committee announced $10 billion reductions in purchases at the previous two meetings.
To contact the reporter on this story: Victoria Stilwell in Washington at firstname.lastname@example.org