Applications for U.S. unemployment benefits unexpectedly fell last week to the lowest level in three months, indicating the labor market may be thawing.
Jobless claims dropped by 11,000 to 445,000 in the week ended Oct. 2, the fewest since July 10, Labor Department figures showed today in Washington. The median forecast or 47 economists surveyed by Bloomberg News projected 455,000 new claims last week. The total number of people receiving unemployment insurance decreased and those getting extended payments jumped.
Fewer dismissals signal companies are gaining confidence sales will hold up in coming months, a necessary first step toward gains in hiring that will help strengthen the economic recovery. A report tomorrow may show the jobless rate rose in September for a second month, indicating a rebound will take time to develop and one reason why the Federal Reserve may ease monetary policy.
“The trend is in the right direction, we’re making progress, but the levels aren’t quite there yet to crack open the champagne,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “Companies are hiring but at a very slow rate. The numbers raise hopes of a pickup in job growth in October but a growth rate that remains subpar.”
Stocks dropped as lower commodity prices depressed mining and energy shares. The Standard & Poor’s 500 Index fell 0.2 percent to 1,158.06 at the 4 p.m. close in New York.
Consumer borrowing fell in August as Americans trimmed credit-card balances, showing consumers remained reluctant to take on more debt as joblessness climbed, Fed data also showed today. Credit declined by $3.34 billion after falling $4.09 billion in July. Credit-card debt decreased for the 24th consecutive month.
Separate figures from the Labor Department showed job openings in August increased 60,000 after rising 277,000 the previous month.
Estimates for jobless claims in the Bloomberg survey ranged from 440,000 to 470,000. The Labor Department revised the prior week’s figure to 456,000 from 453,000.
The four-week moving average, a less volatile measure than the weekly figures, dropped to 455,750 last week from 458,750, today’s report showed. It was the sixth consecutive decrease.
The number of people continuing to receive jobless benefits dropped by 48,000 in the week ended Sept. 25 to 4.46 million, the lowest since June 26.
The continuing claims figure does not include the number of Americans receiving extended and emergency benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments increased by about 257,000 to 5.14 million in the week ended Sept. 18.
The steady decline in the four-week average for initial claims indicates the jump in applications during August may have been caused by improper filing from workers seeking to regain emergency benefits, said John Ryding and Conrad DeQuadros. The program was reinstated by Congress in late July after expiring the previous month.
The downtrend “gives some support to our hunch that the flare up in claims over the summer was not an indication of a weakening labor market but a result of re-filers looking to get back on the federal emergency claims program once the benefits were reauthorized, Ryding and DeQuadros, economists at RDQ Economics LLC in New York, said in a note to clients.
Private employers in September added 75,000 workers while total payrolls were unchanged, according to a Bloomberg survey before tomorrow’s Labor Department figures. The unemployment rate may have increased to 9.7 percent last month.
The economy is a top issue for voters in the November congressional elections, and polls show the public is increasingly skeptical of President Barack Obama’s performance.
While some companies are still firing employees, others are recalling workers.
American Airlines, the third largest U.S. airline, plans to recall 545 flight attendants and 250 pilots to meet demand for international flights as it begins it begins an alliance with British Airways Plc and Spain’s Iberia.
The first 25 pilots will return to work mid-November and about 30 furloughed pilots will be recalled monthly after that, American, a unit of Fort Worth, Texas-based AMR Corp., said yesterday in a statement. The first recall notices for flight attendants will be issued this month to about 225 workers.