New York — The number of Americans filing for unemployment benefits fell last week, unwinding half of the prior period’s jump and suggesting the labour market was tightening despite a recent slowdown in job growth.
Initial claims for state unemployment benefits declined 10,000 to a seasonally adjusted 245,000 for the week ended June 3, the Labour Department said on Thursday. The report followed data on Tuesday showing job openings at a record high in April.
"There is no sign of a pickup in the rate of layoffs. Against this backdrop of high job openings, firms appear to be holding on to their workers," said John Ryding, chief economist at RDQ Economics in New York.
Claims surged by 20,000 in the prior week, with California, Tennessee, Kansas, and Missouri accounting for the bulk of the increase. Some of that increase was related to school summer breaks in which bus drivers and cafeteria workers were left temporarily unemployed.
Claims have now been below 300,000, a threshold associated with a healthy labour market, for 118 straight weeks. That is the longest such stretch since 1970, when the labour market was smaller. The labour market is near full employment, with the jobless rate at a 16-year low of 4.3%. Economists had forecast first-time applications for jobless benefits falling to 240,000 in the latest week. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, increased 2,250 to 242,000 last week.
The dollar rose against the euro after the European Central Bank kept interest rates on hold but cut its forecasts for inflation and said policy makers had not discussed scaling back the central bank’s massive bond-buying programme. Prices for US Treasuries fell, while stocks on Wall Street were slightly higher.
Low layoffs and record-high job openings suggest a deceleration in job growth in May was probably because companies could not find suitable workers. The economy created 138,000 jobs in May, well below the average monthly 181,000 jobs gained over the prior 12 months.
The Labour Department reported on Tuesday that job openings, a measure of labour demand, increased by 259,000 to a seasonally adjusted 6-million in April, the highest level since the government started tracking the series in 2000.
"Labour market supply constraints are expected to bite into job creation but should also help to keep a lid on jobless claims as employers focus on retaining talent, so long as the economy continues to chug along," said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.
Economists believe that labour market tightness could encourage the Federal Reserve to raise interest rates at its June 13-14 policy meeting. The US central bank lifted its benchmark overnight interest rate by 25 basis points in March.
"The Fed will continue to view the labour market data as signalling that the economy remains at or near full employment," said Michael Gapen, chief economist at Barclays in New York.
Thursday’s claims report also showed the number of people still receiving benefits after an initial week of aid fell 2,000 to 1.92-million in the week ended May 27. The so-called continuing claims now have been below 2-million for eight straight weeks, pointing to diminishing labour market slack.
The four-week moving average of continuing claims slipped 750 to 1.91-million, the lowest level since January 1974.