First-Time Unemployment Claims at a 7-Month Low
The number of Americans filing new claims for unemployment benefits dropped to a seven-month low last week, as Hurricane Isabel kept some workers from applying and layoffs slowed.
Initial unemployment claims fell in the week that ended Saturday to 381,000, the lowest level since Feb. 8, after dropping to 400,000 the week before, the Labor Department said. Economists consider 400,000 to be the dividing point between an expanding job market and a contracting one.
Separately, orders for automobiles, computers and other durable goods fell last month. Orders for durable goods -- items made to last at least three years -- fell 0.9% to $173.3 billion after rising a revised 1.5% in July, the Commerce Department said. Excluding transportation equipment, orders fell 0.3% last month to $122.3 billion, after a revised 2.3% gain.
“These numbers are frequently saw-toothed,” rising one month and falling the next, Steven Wieting, an economist at Citigroup Global Markets Inc. in New York, said of the durable-goods news. “I don’t think this changes the picture that there is a manufacturing recovery.”
About half of the decline in unemployment claims may have been because of the hurricane, said Thomas Stengle, a Labor Department spokesman. The second straight decrease in first-time applications nonetheless suggested that companies may be holding on to more workers as demand improves.
“It’s good news because it’s the second week in a row we’ve seen a decline, but we need to see a more definitive drop” in claims, said Geoffrey Somes, senior economist at Fleet Bank in Boston.
Hurricane Isabel, which swept through Middle Atlantic states last week, kept as many as 9,000 people from filing, the Labor Department said.
Claims probably will rise again, say some economists, who contend that Isabel may have skewed the seasonal adjustments that the department uses.
The four-week moving average, a less volatile measure, fell to 407,000 from 411,000, still in excess of the 400,000 threshold.
“Initial claims remain stubbornly high relative to their performance in prior cycles,” William Dudley, chief U.S. economist at Goldman, Sachs & Co., said before the report. “Many more steps are needed to make a giant leap.”
In addition, efficiency gains have allowed companies to do the same amount of work with fewer employees. Productivity increased in the second quarter more than three times as much as in the first, previous government figures show.
“Instead of taking a chance on expanding payrolls, many are again beginning to buy new equipment, which is less risky and less expensive right now than hiring,” Jack Guynn, president of the Federal Reserve Bank of Atlanta, said in a speech Monday.
Fed policymakers last week held borrowing costs to a 45-year low to give the economy room to accelerate and create more jobs.
