U.S. Jobless Claims Drop to 14-Year LowMichelle Jamrisko
Applications for unemployment benefits in the U.S. unexpectedly dropped last week to their lowest level in 14 years as employers avoided trimming staff even as global growth weakens.
Jobless claims decreased by 23,000 to 264,000 in the week ended Oct. 11, the fewest since April 2000 and lower than any projection in the Bloomberg survey of economists, a Labor Department report showed today in Washington. There was nothing unusual in the data and no states were estimated, a spokesman said as the figures were released.
Companies are beefing up staff as payrolls this year remain on track for their biggest gain since 1999. The risk remains that economic slowdowns in Europe and China, a plunge in commodity prices and geopolitical and health risks including the Ebola outbreak hurt confidence and curb further progress.
“This is a little bit heartening to remind everybody that the U.S. economy so far seems it’s doing pretty well,” said Guy Berger, U.S. economist at RBS Securities Inc. in Stamford, Connecticut, whose projection for claims matched the lowest in the survey. “It sets up a pretty good October employment report.”
Stock-index futures held earlier losses following the report. The contract on the Standard & Poor’s 500 Index maturing in December fell 1.4 percent to 1,820.1 at 8:49 a.m. in New York amid deepening concern that global growth is slowing.
The median forecast of 49 economists surveyed by Bloomberg projected the number of claims would increase to 290,000 last week. Estimates ranged from 280,000 to 300,000. The prior week’s reading was unrevised at 287,000.
The four-week average of claims, a less-volatile measure than the weekly figure, declined to 283,500, the lowest since June 2000, from 287,750 in the prior week.
The number of people continuing to receive jobless benefits rose by 7,000 to 2.39 million in the week ended Oct. 4. The unemployment rate among people eligible for benefits held at 1.8 percent during that period, today’s report showed.
A sustained drop in firings typically coincides with a pickup in hiring. Employers added 248,000 workers to payrolls in September, according to Labor Department data. The unemployment rate fell to 5.9 percent, the lowest since 2008. Job gains stayed on pace for their best year since 1999.
“You hear stories that businesses are having trouble finding workers,” Berger said. “If you’re having trouble finding workers, you’re certainly not going to lay off the ones you already have.”
The Columbus Day holiday in the U.S. last week may have made it difficult for the Labor Department to accurately tally the claims data, which means the drop could be overstated, said Berger. The underlying level is probably around 285,000, he said.
Economists project the progress in employment will help mend household balance sheets and lift consumer purchases. That spending, the biggest part of the economy, is poised to grow 2.7 percent next year after a 2.3 percent gain in 2014, according to the latest Bloomberg survey of economists.
At the same time, a weakening in global growth threatens to limit demand and dampen optimism about job gains.
“Specifically in developed markets, the consumer category demand continues to be sluggish,” Indra Nooyi, chief executive officer of Purchase, New York-based PepsiCo Inc., said on an Oct. 9 earnings call. “In developing and emerging markets there’s continued macro and political volatility, most notably in Eastern Europe, the Middle East, and a number of markets in Latin America.”
This week, data showed China’s consumer-price gains declined to the lowest in five months. Reports in Europe showed German investor confidence slid to the weakest level in almost two years while U.K. inflation unexpectedly stalled.
“We’re mindful of the difficult external environment -- I think it’s all of the factors that are out there, be it geopolitical, be it general sentiment, be it economic growth,” Carol Fairweather, chief financial officer of the London-based Burberry Group PLC, said on sales and revenue call earlier this week. “It just looks a little more difficult than it was six months ago.”
Progress in the employment picture has prompted Federal Reserve officials to maintain plans to end monthly bond-buying at their Oct. 28-29 meeting in Washington. At the same time, too-low inflation means they are likely to keep interest rates at record lows well into 2015.
Two-thirds of indicators that Yellen has said she monitors to judge the health of the labor market haven’t yet returned to pre-recession strength. Workforce participation lingers at four-decade lows and underemployment remains elevated compared with pre-recession norms, while the share of jobless who have been out of work for 27 weeks or longer is still twice its historical average in data back to 1948.