The number of Americans filing first-time claims for unemployment benefits dropped last week to the lowest level since April, a sign weakness in the labor market may be starting to abate.
Applications for jobless benefits decreased 22,000 in the week ended July 9 to 405,000, Labor Department figures showed today. Economists forecast 415,000 claims, according to the median estimate in a Bloomberg News survey. The data included fewer layoffs in the auto industry than typical this time of the year, according to an agency spokesman.
A sustained reduction in firings is a first step toward a pickup in hiring after employers in June added the fewest workers in nine months and the jobless rate rose. Federal Reserve Chairman Ben S. Bernanke said yesterday that “disappointing” job growth in the last two months was due to temporary effects, such as high fuel costs and delayed parts shipments from Japan after the March earthquake and tsunami.
“The claims numbers suggests a positive development,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “Part of what’s going on is that in the auto sector a number of factories took their normal seasonal downturn early since a lot of them weren’t able to get parts back in May. They took their hiatus early.”
The Standard & Poor’s 500 Index rose 0.6 percent to 1,325.90 at 10:22 a.m. in New York. The yield on the benchmark 10-year Treasury note climbed to 2.92 percent from 2.88 percent late yesterday.
Retail sales stagnated in June as rising unemployment held consumers back, another report showed. The 0.1 percent increase reported by the Commerce Department compared with the median forecast of a 0.1 percent drop in the Bloomberg News survey of 80 economists. Excluding auto sales, purchases were little changed, the weakest performance since July 2010.
Consumer confidence rose last week as households became more upbeat about the state of their finances. The Bloomberg Consumer Comfort Index increased to minus 43.9 for the period ended July 10 from minus 45.5 the prior week. Even with the gain, which is within the survey’s 3-point margin of error, the gauge is lower than it was at the start of the year.
Unemployment claims dropped to the lowest level since the week ended April 16. Estimates for first-time claims ranged from 375,000 to 440,000 in the Bloomberg survey of 49 economists. The Labor Department initially reported the prior week’s applications at 418,000.
“Seasonal factors expected a fairly large rise in claims. There were some state-reported auto layoffs this week, but probably not as many as usual,” a Labor Department official said as the figures were released. “If you go back traditionally in the first two weeks of July you have a large amount of layoffs primarily from manufacturing.”
Economists at UBS Securities LLC in Stamford, Connecticut, said they projected claims to drop this week because auto-plant shutdowns occurred earlier this year than usual.
“The drop is more technical in nature,” Kevin Cummins, an economist at UBS Securities, said before the report. Regarding some auto assembly plants, “if those temporary layoffs don’t occur in early July when the seasonal factors expect that they would, this may bias the number down a bit.”
The report also included a 11,500 unadjusted increase in claims related to the government shutdown in Minnesota.
Minnesota’s government shut down at 12:01 a.m. July 1, after Democratic Governor Mark Dayton and Republican legislative leaders failed to resolve a budget stalemate at the start of the new fiscal year. The impasse led to the layoffs of about 23,000 state workers, according to John Pollard, a spokesman for Minnesota’s Management and Budget office.
The four-week moving average, a less-volatile measure, fell to 423,250 from 427,000.
The number of people continuing to collect jobless benefits rose by 15,000 in the week ended July 2 to 3.73 million. The continuing claims figure does not include the number of workers 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 16,000 to 3.83 million in the week ended June 25.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3 percent in the week ended July 2, today’s report showed. Thirty-six states and territories reported an increase in claims, while 16 had a decrease.
Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates.
Job gains have slowed in the past two months, raising concern about the durability of a labor market recovery. Payrolls expanded by 18,000 workers last month, the smallest gain since September, after increasing by 25,000 in May, Labor Department data showed July 8. The jobless rate climbed to 9.2 percent, the highest this year, from 9.1 percent.
“The most recent data attest to the continuing weakness of the labor market: The unemployment rate increased to 9.2 percent in June, and gains in non-farm payroll employment were below expectations for a second month,” Bernanke told lawmakers yesterday.
Before the June employment data were released, the Federal Open Market Committee noted in the minutes of its June 21-22 meeting that “the most recent data on employment had been disappointing, and new claims for unemployment insurance remained elevated.”
“Several participants reported feedback from business contacts who were delaying hiring until the economic and regulatory outlook became more certain and who indicated that they expected to meet any near-term increase in the demand for their products without boosting employment,” according to the minutes, which were released July 12.
The central bank officials lowered their projections for employment after the meeting, forecasting joblessness will average 8.6 percent to 8.9 percent in the final three months of 2011, compared with the 8.4 percent to 8.7 percent range they projected in April.
Cisco Systems Inc., the largest networking-equipment company, may cut as many as 10,000 jobs, or about 14 percent of its workforce, to revive profit growth, according to two people familiar with the plans.
“We will provide additional detail on the cost reductions, including layoffs, on our next earnings call,” Karen Tillman, a spokeswoman for San Jose, California-based Cisco, said in reference to an earnings call scheduled for early August.
Cisco Chief Executive Officer John Chambers is slashing jobs and exiting less-profitable businesses as competitors such as Juniper Networks Inc. and Hewlett-Packard Co. take market share in Cisco’s main businesses with lower-priced, simpler products.