Jobless Claims in U.S. Have Dropped About as Much as They Can

Jobless claims in the U.S. probably have nowhere to go but up.

The number of Americans filing applications for unemployment insurance benefits over the past month has dropped to the lowest level since early 2006. Yet last month there were 5.4 million more people in the labor force, which is -- for the most part -- the slice of the population eligible to file, than there were eight years ago.

Jobless claims unexpectedly decreased by 14,000 to 289,000 in the week ended Aug. 2, data from the Labor Department showed today. The four-week average, a less-volatile measure, slid to 293,500.

“I don’t think they’re going to go significantly lower,” said Daniel Silver, an economist at JPMorgan Securities Inc. in New York. “There’s some frictional unemployment. You always have people getting fired, even when the economy’s doing great.”

Even with continued improvement in the labor market, jobless claims probably don’t have much further to fall, agreed Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. Over the past three expansions, initial jobless claims reached an average low of about 274,000, Labor Department data show. In the last 40 years, they’ve never fallen lower than 259,000.

The four-week average as a share of the workforce stood at 1.6 percent at the end of last month. The record low was reached in May 1969 at 1.2 percent. In more recent times, the low was in April 2000 at 1.4 percent.

Near Bottom

“We wouldn’t expect them to decline much, if any, further,” said Shapiro. What’s more, with claims this low, their ability to signal further improvement in hiring will be limited, he said.

“If it sort of bounces around in a reasonably narrow range, they’re not necessarily going to have a lot of information about what payrolls might be doing in any particular month,” said Shapiro.

For Ian Shepherdson, chief economist at Pantheon Macroeconomics Inc. in White Plains, New York, the dearth of jobless applications is still a powerful signal.

“The underlying trend in claims is declining steadily,” Shepherdson wrote in a research note. “We see every chance of very strong payroll numbers, around 250K, becoming the norm through the rest of this year.”

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, Labor Department figures showed earlier this month.

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