Jobless claims show downward trend in hopeful sign
Many economists say new claims, which track layoffs and firings, are trending downward in a modest sign of improvement in the labor market.
The Labor Department said Thursday that the initial claims for unemployment aid rose by 25,000 to a seasonally adjusted 584,000, above analysts' estimates. But the figure is below the 617,000 new claims filed in late June, before the numbers began to be distorted by a shift in the timing of temporary auto shutdowns.
The four-week average of claims, which smooths out fluctuations, fell to 559,000, its lowest level since late January. And the number of people remaining on the jobless benefit rolls unexpectedly fell to 6.2 million from 6.25 million, the lowest level since mid-April.
"The latest report is actually reasonably good news," Abiel Reinhart, an economist at JPMorgan Chase & Co., wrote in a client note. "Obviously, claims are still high ... but things appear to be gradually improving."
Stocks surged in morning trading as investors welcomed both the new data on jobless claims and better-than-expected earnings. The Dow Jones industrial average rose about 152 points, or 1.6 percent, and broader stock averages also jumped.
Still, jobs remain scarce and the unemployment rate, which hit 9.5 percent for June, is expected to surpass 10 percent by year's end.
Weekly claims remain far above the 300,000 to 350,000 that analysts say is consistent with a healthy economy. New claims last fell below 300,000 in early 2007. The lowest level this year was 488,000 for the week ended Jan. 3.
The increase in initial claims last week was mostly due to seasonal distortions, stemming from a move by auto companies to shut their plants earlier than usual this year. Car makers normally close their factories in early July and temporarily lay off thousands of workers as they retool plants to build new car models.
This year, those shutdowns happened in May and June as General Motors Corp. and Chrysler LLC closed plants after filing for bankruptcy protection. That shift in timing caused new claims to fall sharply in the first two weeks of July.
Claims have now rebounded from that artificial decline, a Labor Department analyst said, and next week's numbers aren't expected to be affected.
The recession, which began in December 2007 and is the longest since World War II, has eliminated a net total of 6.5 million jobs. The unemployment rate is expected to rise to 9.7 percent when the July figure is reported next week.
More job cuts were announced this week. Verizon Communications Inc. said Monday that it would cut more than 8,000 employee and contractor jobs before the end of the year.
Among the states, California had the biggest increase in claims, with 4,290, which it attributed to increased layoffs in the construction and trade industries. Michigan, Florida, Connecticut and Indiana had the next-largest increases. State data lags behind initial claims data by one week.
New York had the largest drop in claims, with 22,052, which it said was due to fewer layoffs in the service and transportation industries. Wisconsin, Missouri, Pennsylvania and Ohio had the next largest declines.