Fewer Americans filed applications for unemployment benefits last week, sending the average over the past month to an eight-year low, a sign the labor market continues to gain momentum.
Jobless claims decreased by 14,000 to 289,000 in the week ended Aug. 2 from 303,000 in the prior period, a Labor Department report showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg called for an increase to 304,000.
Companies are holding on to more workers in an effort to keep up with increased orders and stronger consumer demand, contributing to a virtuous cycle of growth as the economy accelerates. Fewer layoffs and more jobs would support further gains in incomes and household spending, which accounts for 70 percent of the economy.
“This is one of the early steps in the process of a really good run for the labor market,” said Thomas Simons, a money market economist at Jefferies LLC in New York, whose forecast for the drop in claims was the closest in the Bloomberg survey. “If we have fewer layoffs, it’s a necessary precondition for an acceleration in hiring, and as hiring increases and the slack in the labor force is taken up, that should put some upward pressure on wages as well.”
Estimates in the Bloomberg survey ranged from 290,000 to 315,000. The prior week’s claims were revised from an initial reading of 302,000.
The four-week average, a less-volatile measure than the weekly figure, dropped to 293,500, the lowest since February 2006, from 297,500 the week before.
Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in September rose 0.3 percent to 1,920.1 at 8:44 a.m. in New York as better-than-estimated earnings from companies including 21st Century Fox Inc. and CenturyLink Inc. overshadowed tensions over the crisis in Ukraine.
No states were estimated last week and there was nothing unusual in the data, a Labor Department spokesman said as the figures were released to the press. The impact of the seasonal swings from auto-plant shutdowns that occur in July is typically over by now, the spokesman said.
The number of people continuing to receive jobless benefits declined by 24,000 to 2.52 million in the week ended July 26.
In that same period, the unemployment rate among people eligible for benefits held at 1.9 percent, the report showed.
Initial jobless claims reflect weekly firings and typically decrease before job growth can accelerate. While the timing and extent of closings to re-tool auto factories for the new model year can cause claims to swing this time of year, claims have remained low by historical standards in recent months as job growth accelerates.
U.S. employers added more than 200,000 workers to payrolls in July for a sixth straight month, the first time that’s happened since 1997. Employment climbed by 209,000 after a 298,000 gain in June, while the jobless rate rose to 6.2 percent as more Americans entered the labor force seeking work.
Even so, companies such as Amgen Inc. are still reducing headcount to lower costs or refocus their business.
The world’s biggest biotechnology company by sales will cut up to 2,900 employees, or 15 percent of its workforce, and close facilities in Washington State and Colorado, according to a statement last week. The move is part of a restructuring plan that focuses on drugs approaching market approval.
Last month Microsoft Corp. said it will eliminate as many as 18,000 jobs, the largest round of cuts in its history. The restructuring, which amounts to about 14 percent of its workforce and includes 12,500 factory and professional positions, is expected to be fully completed by June 2015.
Federal Reserve policy makers are monitoring the labor market’s progress as they wind down their stimulus program. The central bank has said there is still room for improvement, and “a range of labor-market indicators suggests that there remains significant underutilization of labor resources,” according to a statement last week from the Federal Open Market Committee.