Initial Jobless Claims Fall to a 3-Month Low
The number of American workers filing for unemployment benefits declined more than expected last week to the lowest level in three months, suggesting that the pace of job cuts may be easing, the Labor Department reported Thursday.
Initial jobless claims declined to 404,000 in the week ended Saturday from 426,000 the previous week. The total was the closest to 400,000, considered by some economists to be the dividing line between job creation and contraction, since the week ended March 22.
“It looks like payrolls may gradually improve starting in July,” said Robert Mellman, an economist at J.P. Morgan Securities Inc. in New York. The job market “seems to be improving,” he said.
The Federal Reserve on Wednesday cut its benchmark interest rate to help lift the economy, which has been growing at about half the pace needed to help create jobs.
The Commerce Department said Thursday that first-quarter gross domestic product expanded at a 1.4% annual rate, less than the 1.9% it estimated earlier, as companies kept inventories lean. Factories would need to rebuild stockpiles, and perhaps add jobs, if demand rises.
U.S. employers sliced 17,000 positions from payrolls in May as the jobless rate rose to 6.1%, the highest since July 1994, the Labor Department said this month. Even as companies were reluctant to boost hiring, stocks began to rally in March, fueling a rise in consumer confidence.
“The growth rate to date in the American economy has been too anemic,” Treasury Secretary John W. Snow said. “Monetary and fiscal policy are working together to lay the foundations for much better growth.”
Economists had expected claims to ease to 415,000 last week from an initially reported 421,000 the week before, based on the median of 39 forecasts in a Bloomberg News survey.
With the lowering of the GDP growth rate, the first quarter’s pace matched the rate of expansion in last year’s fourth quarter. That’s the weakest six months of growth since the economy contracted in the first three quarters of 2001.
The downward revision “reiterates the economic cost of the war in reduced business activity,” said Edgar Peters, who oversees $12 billion as chief investment officer at PanAgora Asset Management in Boston. “Businesses were unwilling to do more than tread water. While there is hope that the second quarter will be better, the bounce that followed the end of active combat seems muted as well.”
Economic growth needs to accelerate to at least a 3% annual pace to reduce unemployment, some economists estimate. Gross domestic product grew an average of 3.6% a year during the country’s record expansion from 1992 to 2000.
The number of people continuing to collect jobless benefits rose by 43,000 to 3.74 million in the week ended June 14. The four-week average of continuing claims increased to 3.73 million, the highest since 3.74 million in the week ended May 7, 1983, from 3.72 million the previous week.
The insured employment rate, which tends to track the U.S. jobless rate, rose to 3% in the week ended June 14 from 2.9%. The Labor Department also said 11 states and territories reported a rise in new claims, while 42 reported a decrease.
Also Thursday, the American Bankers Assn. said the number of people who were past due on their credit card bills was unchanged in the first three months of this year after reaching a record high in the last quarter of 2002. A seasonally adjusted 4.1% of credit card accounts were past due in the first quarter, the same as the fourth-quarter rate. A year ago, credit card delinquencies were 3.9% in the first quarter of 2002.
