Fewer Americans than forecast filed applications for unemployment benefits last week, making it more likely that the surge in April was caused by temporary events rather than a deterioration in the labor market.
Jobless claims declined by 29,000 to 409,000 in the week ended May 14, Labor Department figures showed today in Washington. The median estimate of economists in a Bloomberg News survey called for a drop to 420,000. The number of applications were the lowest in a month.
Declining firings and gains in hiring are helping sustain consumer spending, which accounts for about 70 percent of the economy, even as food and fuel costs increase. While payrolls have climbed for seven consecutive months, a jobless rate close to 9 percent underscores the need for a pickup in employment that will spur growth.
“We have essentially come full-circle and are unwinding the run up in April,” said Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado. “The labor market is slowly improving. It allows slow, but positive growth in consumer spending.”
Other reports today showed that an index of U.S. leading economic indicators unexpectedly fell in April after nine months of gains, consumer confidence declined last week to the lowest level in nine months, and manufacturing slowed in the Philadelphia area.
The Standard & Poor’s 500 Index erased gains and was little changed at 1,340.56 at 10:11 a.m. in New York. The yield on the benchmark 10-year Treasury note, which moves inversely to prices, rose to 3.20 percent from 3.18 late yesterday.
No Special Factors
There were no special factors affecting last week’s data, a Labor Department spokesman said as the figures were released to the press.
The median forecast was based on a survey of 49 economists. Estimates ranged from 398,000 to 435,000. The Labor Department revised the prior week’s figure up to 438,000 from the 434,000 initially reported.
Claims in April surged to the highest level in eight months due to events that seasonal variations failed to take into account, such as a late school holiday in New York, a new emergency benefits program in Oregon and auto shutdowns caused by the disaster in Japan, the Labor Department has said. Flooding in the South hasn’t been a significant influence so far on the number of applications, the department official said today.
Claims in New York dropped by about 23,000 in the week ended May 7, the report showed, evidence of the unwinding of the late holiday. Applications in Alabama increased by almost 6,000 during the same period as a result of the storms and tornadoes that ravaged the state the prior week.
May Jobs Report
Today’s report covers the week the Labor Department surveys businesses to calculate the monthly payroll figures. The four- week moving average, a less volatile measure than the weekly figures, rose to 439,000 last week from 437,750.
The number of people continuing to receive jobless benefits dropped by 81,000 in the week ended May 7 to 3.71 million.
The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments increased by about 4,400 to 4.11 million in the week ended April 30.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3 percent.
Twenty-nine states and territories reported a decline in claims, while 24 reported an increase. These data are reported with a one-week lag.
Initial jobless claims reflect weekly firings and tend to fall as job growth — measured by the monthly non-farm payrolls report — accelerates.
High fuel costs are among reasons consumers are limiting purchases. Target Corp. (TGT), the second-largest U.S. discount retailer, reported first-quarter earnings that exceeded analyst estimates as its credit-card business helped to counter softer- than-anticipated sales.
“Unemployment remains stubbornly high, hampering overall consumer sentiment and spending,” Gregg Steinhafel, chairman and chief executive officer of Minneapolis-based Target, said on a conference call yesterday. “While the U.S. economy is showing some signs of improvement, we expect the recovery will continue to be slow and uneven.”
Payrolls expanded last month by the most since May 2010, even as the jobless rate climbed to 9 percent, Labor Department data showed. Job market conditions had “continued to improve, albeit gradually,” Fed officials said in minutes of their April 26-27 meeting released yesterday.
“We still have a long way to go before labor markets can be described as healthy,” Federal Reserve Bank of Cleveland President Sandra Pianalto said in a May 11 speech in Cincinnati. “I expect it could take about five years for the unemployment rate to reach its longer-run sustainable rate of 5.5 to 6 percent.”