Jobless claims fall, but less than expected
New U.S. claims for unemployment benefits fell last week, but not enough to assuage fears the labor market recovery has taken a step back.
Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 422,000, the Labor Department said on Thursday, less than economists’ expectations for a fall to 415,000.
The claims report falls outside the survey period for the government’s closely watched data on nonfarm payrolls for May.
The government is expected to report on Friday that employers hired 150,000 last month, according to a Reuters survey, after increasing payrolls by 244,000 in April.
“Every indication we have had so far points to a slightly softer labor market in the U.S.,” said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.
U.S. stock index futures held gains after the data, while U.S. bond prices extended losses. The dollar also extended losses against the euro. There is a risk that May payrolls could come in below consensus after ADP, a payroll service company, reported private employers added only 38,000 last month, the smallest number since September.
However ADP has a poor track record at predicting nonfarm payrolls.
In a second report, the Labor Department said nonfarm productivity grew at a a slightly faster 1.8 percent annual rate in the first quarter, rather than the 1.6 percent previously reported. Productivity was still slower than the 2.9 percent pace set in the fourth quarter.
Wage growth remained muted, with unit labor costs rising at a 0.7 percent rate rather than the previously estimated 1 percent rate. Unit labor costs dropped at a 2.8 percent rate in the fourth quarter.
Data ranging from consumer spending to manufacturing indicates the economy has taken a decisively weak tone -- at a time when the Federal Reserve is scheduled to wrap up its $600 billion government bond-buying program at the end of the month.
The bar is very high for an extension of the program and there is little or no political will for fiscal stimulus amid a ballooning budget deficit and high headline inflation.
Officials at the U.S. central bank generally view the soft patch that started early in the year, because of high commodity prices and supply chain disruptions, as temporary.
But there are some hopeful signs. A handful of U.S. retailers beat analysts’ sales expectations for May, winning with strong selections of goods or drawing in shoppers looking for deals.
Warehouse club Costco Wholesale Corpand department store operator Macy’s Incposted better-than-expected sales.
While the labor market improvement has slowed, a host of temporary factors have been at play. Initial claims have been volatile in recent weeks as supply chain disruptions from the March earthquake in Japan caused temporary motor vehicle plant closures.
Claims have also been distorted by bad weather in some parts of the country and problems smoothing the data for seasonal variations.
A Labor Department official said there was nothing unusual in the state-level data.
He also said Missouri had indicated that floods were affecting claims in the state, but provided insufficient information to quantify the impact.
The four-week moving average of new jobless claims, considered a better gauge of labor market trends, fell 14,000 to 425,500.
Initial claims have now been perched above the 400,000 mark for eight weeks in a row. Analysts normally associate that level with steady job growth.
The number of people still receiving benefits under regular state programs after an initial week of aid slipped 1,000 to 3.71 million in the week ended May 21.
Economists had expected so-called continuing claims to dip to 3.67 million from a previously reported 3.69 million.
The number of people on emergency unemployment benefits rose 3,363 to 3.42 million in the week ended May 14, the latest week for which data is available. A total of 7.68 million people were claiming unemployment benefits during that period under all programs.
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