US jobless claims drop to five-year low

The number of Americans filing new claims for unemployment benefits fell unexpectedly last week, touching a 5½ year low, suggesting a steadily improving labour market.

Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 326,000, the lowest level since January 2008, the Labor Department said today.

Economists polled by Reuters had expected first-time applications to rise to 345,000 last week.

While claims are extremely volatile in July because of summer car plant shutdowns, the general tone of the report remained consistent with a pick-up in job gains.

The four-week moving average for new claims, which irons out week-to-week volatility, fell 4,500 to 341,250.

“This suggests the labour market is still expanding. There is no sign that it’s slowing. It might actually be picking up a bit,” said David Sloan, senior economist at 4Cast in New York

Carmakers traditionally close assembly plants for retooling in July, but they have either shortened the shutdown period or completely forgone the closures, throwing off the model that the government uses to adjust the data for seasonal variations.

US Treasury debt prices fell on the claims report, extending earlier losses. U.S. stock index futures were little changed.

Last week’s claims data has no bearing on tomorrow’s employment report for July. The government’s closely monitored report is expected to show nonfarm payrolls increased 184,000 last month after rising 195,000 in June, according to a Reuters survey of economists.

The jobless rate is seen ticking down a tenth of percentage point to 7.5 per cent. There is a risk payrolls could surprise on the upside after a report on Wednesday showed private employers maintained a higher pace of hiring in July.

Job gains in the second quarter averaged 196,300 per month.

The labour market is being closely watched by the Federal Reserve, which on Wednesday offered no indication it planned to reduce its monthly $85 billion in bond purchases at its next meeting in September.

While the pace of economic growth has been tepid, there has not been a pick-up in layoffs. A separate report from consultants Challenger, Gray & Christmas showed planned layoffs at US firms fell 4.2 per cent in July.

So far this year, employers have announced 296,633 job cuts, down from the 319,946 in the same period last year.

The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid fell 52,000 to 2.95 million in the week ended July 20th.