Jobless Claims Tap 4-Year Low (Update 1)
Updated to include added commentary.
NEW YORK (
) -- Claims for jobless benefits fell to their lowest level in four years, according to a Labor Department report.
The data, along with stronger than expected reports of hiring in January from ADP and the Labor Department payrolls report signals that the U.S. job market is picking up the steam needed to push the unemployment rate below 8%.
Applications by workers seeking unemployment insurance payments fell by 13,000 in the week ended Feb. 11 to 348,000, putting overall claims far less than estimates of 365,000, according to economist forecasts compiled by
Bloomberg
.
|
A slowing of layoffs and unemployment claims comes at the same time as private sector hiring moves above 200,000 monthly workers, enough to push the overall unemployment rate lower.
"That today's number was not only better than expected but much better than expected can only be received warmly, providing further evidence that at least on the firing side of things, the labor market is improving considerably," wrote BTIG chief global strategist Dan Greenhaus in a note after claims numbers were released.
"If this trend continues, one would have to believe, given previous relationships, that the monthly employment report will begin printing 200K plus job additions on a regular basis," added Greenhaus.
Earlier in February, an monthly employment report from the
Labor Department
showed increasing momentum in hiring as unemployment claims drop. More workers were hired in January than any month since April 2011, with payrolls expanding by 243,000 jobs, pushing the unemployment to a three-year low of 8.3%.
Estimates for first-time claims ranged from 350,000 to 380,000 in the Bloomberg survey of 45 economists. The Labor Department revised the prior week's reading up to 361,000 from an initially reported 358,000.
The number of people continuing to collect jobless benefits dropped by 100,000 in the week ended Feb. 4 to 3.43 million, the fewest since August 2008. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.
While the data signals a strengthening in the jobs market that may bode well for the wider U.S. economy,
Federal Reserve
remains cautious. In Feb, the Federal Reserve announced that it would likely keep interest rates low through 2014, signaling uncertainty over a protracted fall in the unemployment rate, which is still at historically high levels.
A Thursday report from the
Labor Department
showed a less than expected rise in wholesale prices. A lack of inflation may allow the Federal Reserve to maintain an interest rate policy that accomodates a recovery in growth and employment.
"There is still a great deal of slack in the economy, and given the slow recovery in demand, inflationary pressures are minimal," said Gus Faucher a senior economist at PNC Financial Services. "This is allowing the Fed to keep both short-term and long-term interest rates at historically low levels," Faucher added.
Falling claims and a dropping unemployment rate may also be a reflection of a shrinking labor market, muddying signs of a strengthening economy.
In recently released minutes from the Fed, those concerns were voiced. "A few participants noted that the recent decline in the unemployment rate reflected declining labor force participation in large part, and judged that the decline in the participation rate was likely to be reversed, at least to some extent, as the recovery continues and labor demand picks up," according to minutes of the Federal Open Market Committee meeting Jan. 24-25 released on Wednesday.
-- Written by Antoine Gara in New York
