US weekly jobless claims fall; first-quarter GDP revised higher

THE number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to continued labour market strength.

Initial claims for state unemployment benefits dropped 26,000 to a seasonally adjusted 239,000 for the week ended Jun 25, the Labor Department said on Thursday (Jun 29). Economists polled by Reuters had forecast 265,000 claims for the latest week.

In the prior three weeks, claims had hovered at elevated levels last seen in October 2021. The readings had suggested a pick-up in layoffs, consistent with a rise in announced job cuts outside the technology sector as the economy starts to feel the impact of the Federal Reserve’s hefty interest rate increases.

Recent policy changes in Minnesota making tens of thousands hourly paid school workers eligible for state unemployment benefits during the summer break also accounted for some of the increase in claims. Fraud in some states could also be an issue.

Claims, relative to the size of the labour market, are well below the 280,000 level that some economists said would signal a significant slowdown in job growth. Employment growth has averaged 314,000 jobs per month this year.

Job growth is being driven by the services sector, including the leisure and hospitality category, which is still catching up after businesses struggled to find workers over the last two years. Industries such as healthcare and education also experienced accelerated retirements during the Covid-19 pandemic.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, fell 19,000 to 1.742 million during the week ending Jun 17, the claims report indicated.

The so-called continuing claims are low by historical norms, indicating that some laid-off workers were experiencing shorter spells of unemployment.

A survey from the Conference Board this week showed consumers’ perceptions of the labour market to be upbeat in June, with more viewing jobs as “plentiful” relative to May, and a slight decline in the share who believed that jobs were “hard to get”.

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Continuing claims covered the period during which the government surveyed households for June’s unemployment rate. Continuing claims fell between the May and June survey periods. The unemployment rate was at 3.7 per cent in May.

Labour market strength helped to prop up the economy in the first quarter, through an acceleration in consumer spending, which offset the drag from a sharp slowdown in the pace of inventory investment by businesses.

Gross domestic product (GDP) increased at a 2 per cent annualised rate last quarter, the Commerce Department said in its third estimate of first-quarter GDP on Thursday. That was revised up from the 1.3 per cent pace reported last month.

“The updated estimates primarily reflected upward revisions to exports and consumer spending,” said the department.

It added that this was partly offset by downward revisions in other areas such as non-residential fixed investment.

Consumption has provided a boost to the US economy, providing it a strong start to 2023 even as banking sector turmoil and higher interest rates weighed on the outlook.

But economic activity has been easing as the US central bank rapidly hiked its benchmark lending rate to rein in stubborn inflation.

While GDP growth in the world’s biggest economy has still cooled from 2.6 per cent in the final three months of 2022, the latest figure is markedly higher than the annual rate of 1.1 per cent originally estimated. REUTERS, AFP