US Jobless Claims Drop Unexpectedly, Bolster Labor Market

The number of people who filed for unemployment assistance in the US unexpectedly dropped last week, bolstering a healthy American labor market, official data reported on Thursday.

The report showed that initial jobless claims decreased to 230,000, a fall of 1,000 from the previous week’s revised level of 231,000. Economists had forecasted that jobless claims would increase to 238,000 from the 233,000 originally reported for the previous week.

Last week marked the 152nd consecutive week that claims remained below the 300,000 threshold. This was the longest stretch since 1970 when the labor market was much smaller.

“The untapped reservoir of unemployed or underemployed skilled workers that existed in the aftermath of the recession has largely disappeared,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Michigan. “Employers are finding it more difficult to find potential workers.”

Further, the Labor Department said that claims for Maine were estimated last week, while claims-taking procedures in Puerto Rico and the Virgin Islands had still not returned to normal months after the territories were affected by Hurricanes Irma and Maria.

The 4-week moving average of initial claims, which showed a better measure of labor market trends as it flattens week-to-week volatility, decreased 5,000 to 234,000, the lowest level since early November.

First-time jobless claims below the 300,000-level are usually associated with a strengthening labor market.

However, continuing jobless claims in the week ended January 20 climbed to 1.953 million. Analysts had expected continuing claims to decrease to 1.928 million.

In the preceding week, they settled at 1.940 million, revised up from an initial reading of 1.937 million.

The 4-week moving average of continuing claims climbed to 1,932,750, an increase of 12,000 from the previous week’s revised average of 1,920,750.

Additionally, employment is expected to increase by 180,000 jobs in January after advancing 148,000 jobs in December. The unemployment rate is expected to hold at 4.1%.

“The numbers are consistent with the trend in employment growth remaining more than strong enough to keep the unemployment rate trending down,” said Jim O’Sullivan, forecaster at High Frequency Economics. He also projected that Friday’s jobs report would show 160,000 new jobs.

The Labor Department said that non-farm productivity, which measures hourly output per worker, fell at 0.1% annualized rate in the 4th quarter. This was its first fall and weakest performance since the 1st quarter of 2016 and followed a 2.7% pace of increase in the 3rd quarter.

Productivity increased at a rate of 1.1% last year, compared to the 4th quarter of 2016. It grew 1.2% in 2017, the fastest since 2015, after dipping 0.1% in 2016.

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