Americans Win Job Security With Firings Low for Three Months

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U.S. Jobless Benefits Applications Remain Below 300K

Workers in the U.S. have one thing going for them right now: job security.

For the 12th consecutive week, the number of applications for jobless benefits remained below 300,000, according to figures from the Labor Department issued Thursday. The report for the seven days ended May 23 showed that claims are hovering just above 15-year lows reached at the end of April.

Such few firings typically correspond with bigger gains in payrolls than the U.S. has seen over the past two months, raising the odds that employment will accelerate as the world’s largest economy emerges from a first-quarter slump. Another report showed more Americans signed contracts to buy existing homes in April for the fourth straight month, evidence that a strengthening job market will help boost growth.

“We’re seeing an improving labor market and an improving housing market,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York. “The two go hand in hand. The claims and home sales reports are encouraging for second-quarter growth.”

O’Sullivan is the top forecaster of jobless claims and second-best predictor of pending home sales in the past two years, according to data compiled by Bloomberg.

Stocks slipped, with benchmark indexes near records, as investors watch for progress on Greek debt talks. The Standard & Poor’s 500 Index dropped 0.1 percent to 2,120.79 at the close in New York.

Jobless Claims

Jobless claims increased last week by 7,000 to 282,000, the Labor Department’s data showed. The prior week’s reading was revised to 275,000 from an initially reported 274,000.

The number of applications were as low as 262,000 in the week ended April 24, the fewest since 2000. The last time claims held below 300,000 for at least three months was also 15 years ago. At that time, the labor force was much smaller, making today’s low readings even more impressive.

The median forecast of 51 economists surveyed by Bloomberg called for 270,000. Estimates ranged from 265,000 to 285,000.

Persistently low firings signal managers are planning for at least steady business demand. As joblessness approaches the Federal Reserve’s definition of full employment, employers might be pressured to boost paychecks in order to retain and attract workers.

“The firing side of the equation has pretty much run its course in terms of recovering to normal,” said Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York, whose projection for 280,000 claims was among the closest in the Bloomberg survey. “The unemployment rate should continue to decline and wage pressures on the back of that should firm up.”

Four-Week Average

The four-week average of claims, a less-volatile measure than the weekly figure, climbed to 271,500 from a 15-year low of 266,500 the prior week.

Job gains have been slow to rebound after a weaker start to the year, rising by 223,000 in April after 85,000 the prior month that was the lowest since June 2012.

“Claims are consistent with payroll growth above 250,000,” Ian Shepherdson, chief economist at Pantheon Macroeconomics Ltd., in Newcastle, U.K., wrote in a research note.

Payroll increases have averaged 193,750 a month in 2015 after a 259,670 average last year that was the best since 1999.

A firm job market, easier credit availability and borrowing costs still close to historically low levels are among reasons housing is strengthening.

Pending Sales

The index of pending home resales climbed 3.4 percent in April to the highest level in nine years, the National Association of Realtors said Thursday.

Real-estate agents “are saying foot traffic remains elevated this spring despite limited -- and in some cases severe -- inventory shortages in many metro areas,” NAR chief economist Lawrence Yun said in a statement. “Homeowners looking to sell this spring appear to be in the driver’s seat.”

Economists consider pending sales a leading indicator because they track contract signings. Purchases of existing homes are tabulated when a deal closes, typically a month or two later.

Those resales, which make up more than 90 percent of the housing market, dropped 3.3 percent to a 5.04 million annualized rate in April after a 5.21 million pace that was the strongest in almost two years, the Realtors group reported on May 21. The median price from a year earlier posted the biggest 12-month gain since January 2014 as the number of houses for sale fell from the same time last year.

Construction Equipment

A steadily improving labor market is among things construction equipment maker Deere & Co. sees contributing to a brighter economic outlook.

“The economy continues to move forward,” Susan Karlix, manager of investor communications at the Moline, Illinois-based company, said on a May 22 earnings call. “GDP growth is improving, unemployment is falling, construction hiring is on the increase, and housing starts are expected to exceed 1 million units this year.”

The world’s largest economy is crawling out of a first-quarter slump, when it barely expanded amid a stronger dollar, severe weather and a labor dispute at West Coast ports. Gross domestic product increased at a 0.2 percent pace in the first three months of the year, Commerce Department data show.

The government’s revised estimate probably will indicate GDP contracted at a 0.8 percent rate, according to the median estimate in a Bloomberg survey ahead of Friday’s release.

Confidence Wavering

One note of caution is coming from consumer confidence surveys, which have signaled sentiment is wavering.

The Bloomberg Consumer Comfort Index decreased to 40.9 in the period ended May 24, the lowest level since late November, from 42.4 the prior week, according to another report Thursday. Attitudes about whether it was a good time to spend slumped by the most since 2011, and that was accompanied by the biggest drop in sentiment among women in more than seven years.

“A stellar Q4 last year has turned into a mixed 2015 for consumer sentiment, with highs in late January and early April followed by sharp corrections,” Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg, said in a statement.

Fed Chair Janet Yellen sees the labor market encouraging consumers to be more willing to spend.

“The U.S. economy seems well-positioned for continued growth,” Yellen said in a May 22 speech in Providence, Rhode Island. “Households are seeing the benefits of the improving jobs situation.”

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