Americans filed fewest jobless claims in past month since 2007

WASHINGTON – Fewer Americans filed applications for unemployment benefits over the past month than at any time in seven years, a sign the labor market continues to strengthen.

The four-week average for jobless claims fell to 310,250 in the period ended May 31, the lowest since June 2007, a Labor Department report showed Thursday in Washington. The number of applications last week climbed to 312,000 from 304,000, in line with the median forecast of economists surveyed by Bloomberg.

A drop in dismissals over time may be a sign that companies, lean from prior job cutting, are preparing for improving demand. Now, sustained hiring gains are needed to push up wages and spur better consumer spending, which accounts for 70 percent of the economy.

“Momentum in the labor market has improved a little bit,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Conn. “But I think you need to see hiring pick up. That’s the piece of the puzzle we’re waiting for.”

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Stock-index futures held earlier gains after the report as the European Central Bank lowered interest rates to boost the economy and promised more policy decisions on Thursday. The contract on the Standard & Poor’s 500 Index maturing this month rose 0.4 percent to 1,932.8 at 8:42 a.m. in New York.

Survey results

The median forecast of 52 economists surveyed by Bloomberg projected the number of claims would increase to 310,000 last week. Estimates ranged from 300,000 to 325,000. The Labor Department revised the prior week’s reading from an initial reading of 300,000.

No states were estimated last week and there was nothing unusual in the data, a Labor Department spokesman said as the report was released to the press.

The number of people continuing to receive jobless benefits dropped by 20,000 to 2.6 million in the week ended May 24, the fewest since October 2007. The unemployment rate among people eligible for benefits held at 2 percent in the week ended May 24, Thursday’s report showed.

Employers added 288,000 workers to payrolls in April, and further gains are projected. The median economist in a Bloomberg survey forecast a 215,000 increase when May data are released on Friday.

ADP report

Private companies in May posted a 179,000 increase in employment that was the smallest in four months, Roseland, N.J.-based ADP Research Institute reported Wednesday.

An improving labor market is among reasons the Federal Reserve continues to cut monthly bond purchases. At their last meeting in April, policy makers said “participants generally expected further gradual improvement,” in hiring, according to a May 21 statement.

A bounce-back in employment isn’t true for everyone. United States Steel Corp. is shuttering two factories in response to foreign competition, which could affect about 260 employees in Texas and Pennsylvania.

“The indefinite idling of these loss-making operations will reduce the number of U.S. Steel’s tubular facilities from 10 to eight, but will enable the company to operate more profitably,” according to a June 2 release.

Manufacturing as a whole, however, is picking up. The Institute for Supply Management’s factory index rose to 55.4 in May from the prior month’s 54.9, expanding at the fastest pace this year, a report showed earlier this week. Vehicle sales climbed to a 16.7 million annual pace in May, the strongest since February 2007, Ward’s Automotive group data showed June 3.

The Institute’s non-manufacturing index showed Wednesday that services are also rallying, climbing to 56.3 last month from 55.2 in April. Readings above 50 signal expansion.

“At this level of business activity and new orders in the pipeline, the employment is going to have to go up,” Anthony Nieves, chairman of ISM’s non-manufacturing survey committee, said in a conference call with reporters. “Capacity will become an issue.”

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