The fewest Americans in four decades filed applications for unemployment benefits last week, continuing to unwind an early-July surge that was probably tied to mid-year factory shutdowns and school vacations.
Jobless claims plunged by 26,000 to 255,000 in the week ended July 18, the fewest since November 1973, a report from the Labor Department showed on Thursday in Washington. The median forecast of 47 economists surveyed by Bloomberg called for 278,000. Volatility is typical for this time of year as auto plants retool for the new model year and school staff varies with summer holidays, a department spokesman said as the data was released to the press.
Claims continue to hover near historically low levels as employers are retaining workers to cater to a pickup in demand following a slump in early 2015. Combined with steady hiring across states, the improvement will help sustain household spending, the biggest part of the economy.
“Companies are holding on to employees because they’re needed not just to satisfy current demand but also for growth initiatives,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, who is among the best claims forecasters over the past two years, according to data compiled by Bloomberg. “It’s yet another sign we’re likely to see solid economic expansion in the second half.”
Claims were estimated for Puerto Rico last week, the Labor Department spokesman also said.
Since early March, claims have been below the 300,000 level that economists say is typically consistent with an improving job market.
Auto plants typically close around this time of the year as they retool operations for new models. The timing often differs from one year to the next, making it difficult for the Labor Department to adjust the claims figures for these seasonal swings.
Last week coincided with the survey period for the Labor Department’s July payroll report. Because of the added volatility, it’s important to focus more on longer-term trends.
The four-week moving average, a less volatile measure than the weekly numbers, decreased to 278,500 from 282,500. That was little changed from the 277,000 average during the June survey period.
Economists’ estimates in the Bloomberg survey ranged from claims of 260,000 to 300,000. The previous week’s figure was unrevised at 281,000.
Hiring has been strong, Labor Department figures showed on July 2. Payrolls increased by 223,000 in June following a 254,000 gain the prior month. The U.S. jobless rate fell to a seven-year low of 5.3 percent, while wages stagnated and the size of the labor force receded.
Automakers, including General Motors Co. and Ford Motor Co., are benefiting from growing sales as Americans’ finances improve.
“We just wrapped up the U.S. auto industry’s best six months in a decade,” said Kurt McNeil, GM’s U.S. vice president of sales operations. “People feel good about their jobs and the direction the economy as a whole is taking, so the second half of the year should be strong, too.”
Federal Reserve policy makers, considering raising interest rates later this year for the first time since 2006, have noted the labor market is making strides while pointing out that some slack remains.
Initial jobless claims reflect weekly firings, and a sustained low level of applications has typically coincided with faster job gains. In an environment of accelerating employment growth, many weekly layoffs may also reflect company- or industry-specific causes, such as cost cutting or business restructuring, rather than underlying labor-market trends.
Qualcomm Inc., seeking to appease investors after posting its worst sales decline since 2009, said on Wednesday that it plans to shake up its board and cut its workforce by 15 percent as competition stiffens in the smartphone-chip market.