Initial Jobless Claims Sink Back Near Five-Year Lows

Andrew Klips |

The markets are roaring ahead to new all-time highs again on Thursday after fewer than expected Americans filed for first time jobless benefits last week, according to the latest report from the Labor Department.  The report signals that the economy continues on a slow-and-steady path to recovery and that companies are keeping employees despite a swath of tax hikes and federal spending cuts put in place earlier this year.

For the week ended July 13, initial jobless claims, a proxy of weekly layoffs, dropped by 24,000 to a seasonally adjusted 334,000, marking the lowest level in four months and near five-year lows that were set in April at 327,000.  The prior week’s figure was revised lower from 360,000 to 358,000. 

Economists expected claims to drop, but only to about 345,000.

Nothing unusual was found in the latest data and no states provided estimates on claims, according to the Labor Department.

The four-week moving average, a less volatile read on the labor market, was lower by 5,250 to 346,000.  Economists generally view levels below 350,000 as indicating moderate jobs growth for the country.

Figures this month have been especially volatile due to the July 4 holiday and scheduled factory shutdowns for maintenance.  Investors have been paying extra close attention to the labor markets as a direct influence on the policy of the Federal Reserve to continue its extraordinary purchases of Treasuries and mortgage-backed securities.  Fed Chairman Ben Bernanke has testified in front of Congress this week that the central bank remains flexible in its stimulus plans and that it can either increase or decrease its efforts based upon unemployment rates and the overall strength of the economy.  Many economists expect the Fed to begin tapering its stimulus before the year ends, possibly as early as September.

Continuing claims, which are an estimate of the number of people already receiving state benefits and reported at a one-week lag, increased by 91,000 to 3.11 million for the week ended July 6.

The total number of people collecting benefits in all programs, including extended federal claims, edged down from 4.521 million to 4.519 in the week ended June 29.  Total claims are reported at a two-week lag.

The biggest decreases in initial claims for the week ending July 6 were in New Jersey (-4,370), California (-4,265) and Texas (-3,133).  The largest increases were in Michigan (+17,700), New York (+15,163) and Pennsylvania (+4,831).

Wall Street was rattled in June on comments from Chairman Bernanke that the Fed was in discussion to begin winding down QE3.  More recently, dovish comments from Fed officials have placated the markets, sending the Dow Jones Industrial Index upward more than 1,000 points from June lows.  In Thursday action, the Dow is ahead 107 points, which – if it holds – will represent the highest close ever for the Dow.  The S&P 500 is in a similar position by rising 10 points today.  The Nasdaq is up 8 points and stands at its highest point since October 2000.

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