Jobless claims in US drop to 9-month low

New US claims for unemployment benefits dropped to a nine-month low last week, a government report showed yesterday, suggesting a labour market recovery was gaining momentum. Initial claims for state unemployment benefits fell 23,000 to a seasonally adjusted 381,000, the Labor Department said, the lowest since late February. Economists had expected a smaller fall, to 395,000. The report, coming after data last week showing a rise in hiring and a sharp drop in the unemployment rate to a 2-1/2-year low of 8.6% in November, pointed to some strengthening in a sector that has been the Achilles heel of the economy’s recovery. It was the latest sign of acceleration in economic growth in the current quarter after output expanded at a 2% annual rate in the July-September period. “It looks as if the US labour market does not know how to spell the words euro contagion,” said Cary Leahey, economist at Decision Economics in New York. “This is a good report ... adds to the sense that the job market continues to brighten, though very slowly.” The US economy is relatively strong as much of the global economy is slowing and parts of the eurozone are already in recession, prompting the European Central Bank to cut interest rates by a quarter of a percentage point a record low 1% yesterday. The pickup in the US labour market could improve President Barack Obama’s prospects of winning a second term in what is shaping up to be a tough election next November. However, many analysts believe US growth will lose a step in the New Year as the slowdown in Europe begins to weigh. “The downtrend in claims remains intact, reinforcing the improving underlying fundamentals in the US economy which now looks to be outperforming most regions of the world, including China on a relative basis,” said Eric Green, chief economist at TD Securities in New York. “However, good news can turn bad quickly if the euro crisis takes a turn for the worse.” Stocks on Wall Street fell as the ECB doused hopes of dramatic crisis-fighting action in the euro area. US Treasury debt prices reversed earlier losses while the dollar rose against a basket of currencies. Other data yesterday showed a jump in US wholesale inventories in October, further boosting expectations of solid fourth-quarter growth. Wholesale inventories climbed 1.6%, the Commerce Department said , after gaining 0.3% in September. Liquidation of inventories by businesses in the third quarter contributed to a slower pace of gross domestic product growth. The drop in claims last week more than unwound the prior two weeks’ increase, and pulled them back below the 400,000 level usually associated with improving labor market conditions. A Labor Department official said there was nothing unusual in the state level data but noted that the labour market was now entering a period of seasonal layoffs. That could make claims in the coming weeks very volatile. The four-week moving average of claims, considered a better measure of labour market trends, fell 3,000 to 393,250, the lowest since early April. The number of people still receiving benefits under regular state programs after an initial week of aid dropped 174,000 to 3.58mn in the week ended November 26, the lowest since mid-September 2008. Economists had forecast so-called continuing claims falling to 3.70mn from a previously reported 3.74mn. The number of Americans on emergency unemployment benefits declined 178,610 to 2.79mn in the week ended November 19, the latest week for which data is available. A total of 6.57mn people were claiming unemployment benefits during that period under all programmes, down 431,397 from the prior week.