An unexpected drop in new claims for U.S. jobless aid hinted that the country’s battered labor market might be steadying, government data on Thursday showed, although employment conditions remain very weak.
Job-shedding by U.S. companies helped bolster worker productivity in the first quarter, according to a separate government report, as the number of hours worked shrank by the steepest annualized pace since 1975.
"The (jobless) numbers are the lowest since late January and are down for the second straight week. That’s encouraging, because it means that the pace of firings has stabilized," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.
Stock index futures added to gains, U.S. government securities prices extended losses and the dollar was steady against the euro as the market digested the data.
Initial claims for state unemployment insurance benefits dropped to a seasonally adjusted 601,000 in the week ended May 2 from a revised 635,000 the prior week, the Labor Department said. It was the lowest reading since late January.
Analysts polled by Reuters had forecast 635,000 new claims versus a previously reported count of 631,000 the week before.
A deep U.S. recession has already cost over 5 million jobs since it began in late 2007 and analysts expect the government’s employment report for April, due on Friday, will show that a further 595,000 more jobs were lost last month.
But there have been some scattered indications that labor market conditions might be stabilizing, albeit at still very weak levels, alongside other glimpses of hope that the severity of the recession may be easing.
The four-week average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, fell for the fourth week in a row to 623,500 from 638,250 the week before. This was the smallest reading since mid-February.
Economists expect the labor market will remain very depressed even when growth begins to pick up, and the weekly report emphasized conditions remain bleak for millions of Americans.
"It’s encouraging to see jobless claims numbers come down. There were fewer new claims than expected. It’s starting to signal some stabilization in the labor markets, but claims are still very high and we’re not out of the woods yet," said Gary Thayer, senior economist with Wells Fargo Advisors in St. Louis, Missouri.
The number of people staying on the benefits roll after drawing an initial week of aid rose 56,000 to 6.351 million in the week ended April 25, the most recent week for which data is available. Analysts estimated so-called continued claims would be 6.36 million.
It was the highest reading on record and pushed the insured unemployment rate to 4.8 percent from 4.7 percent the week before. Continued claims have now notched fresh record high readings for 14 straight weeks.
Separately, the Labor Department said U.S. worker productivity outside the farm sector grew at an annual rate of 0.8 percent in the first quarter, after the number of hours worked fell faster than output as firms cut back sharply on employment to protect profits.
Economists polled by Reuters expected non-farm productivity, which measures the hourly output per worker, to increase at an 0.6 percent pace, compared with a revised 0.6 percent drop the previous three months.
The Labor Department said worker hours shrank at a 9.0 percent rate in the first quarter, the sharpest pace of decline since a 12.0 percent drop in the first quarter of 1975.
Cuts in worker hours will help to shield corporate profits as employers hunker down and wait for an economic upturn that U.S. officials say will get underway later this year.
