Unemployment benefits suggest upswing in job market
Unemployment benefits claims dropped last week, a promising sign for the American job market. Can the unemployment benefits data remain strong?
Fewer people applied for unemployment benefits last week, a hopeful sign that the job market might be picking up.
The Labor Department said Thursday that weekly applications dropped 9,000 to a seasonally adjusted 397,000, the lowest level in five weeks. It's only the third time since April that applications have fallen below 400,000.
Economists were encouraged by the drop, though they cautioned that the trend would have to persist to signal real improvement.
"Should the gradual decline seen in recent weeks continue, this would mark an important sign" that the job market is improving, Peter Newland, an economist at Barclays Capital, said in a note to clients.
The four-week average of applications, a less volatile measure, fell to 404,500, the fifth drop in the past six weeks. The declines indicate that companies are laying off fewer workers.
The figures come a day before the government issues the October jobs report. Economists expect it will show a net gain of 100,000 jobs, with the unemployment rate remaining 9.1 percent.
Still, applications would need to fall below 375,000 to signal sustained job gains. They haven't been at that level since February.
And a separate report showed that U.S. workers were more productive last summer. The trend is good for corporate profits but not necessarily for job growth — unless customer demand were to increase.
Productivity rose at an annual rate of 3.1 percent in the July-September quarter after two straight quarterly declines.
The economy is growing modestly but not by enough to encourage much hiring. Last week, the government said the economy expanded at a 2.5 percent annual pace in the July-September quarter, the best quarterly growth in a year.
That's strong enough to calm fears of another recession. Still, growth would have to be nearly twice as high — consistently — to make a major dent in the unemployment rate, which has been stuck near 9 percent for more than two years.
The figures come a day before the government releases its October jobs report. Analysts expect employers added 100,000 net jobs, nearly the same as the 103,000 added in September. The unemployment rate is expected to stay at 9.1 percent for a fourth straight month.
Employers have added an average of only 72,000 jobs per month in the past five months. That's far below the 100,000 per month needed to keep up with population growth. And it's down from an average of 180,000 in the first four months of this year.
Federal Reserve Chairman Ben Bernanke said Wednesday that growth is likely to be "frustratingly slow," after the Fed sharply lowered its economic projections for the next two years.
The Fed now says the economy will likely expand no more than 1.7 percent for all of 2011. That's down from its June forecast of 2.7 percent to 2.9 percent. And it predicted growth of only 2.5 percent to 2.9 percent next year. In June, the Fed estimated growth of 3.3 percent to 3.7 percent in 2012.
The Fed said it doesn't expect the unemployment rate to be any lower this year. And it sees unemployment averaging 8.6 percent by the end of next year. In June, it had predicted unemployment would drop in 2012 to as low as 7.8 percent.
The number of people receiving unemployment aid under regular state programs dropped 15,000 to 3.68 million in the week that ended Oct. 22. That doesn't include more than 3 million who are receiving extended benefits under an emergency program paid for by the federal government.
All told, 6.8 million people received benefits in the week that ended Oct. 15, the last period for which inclusive figures are available.