WASHINGTON — The number of Americans filing applications for unemployment benefits dropped last week to the lowest level in more than eight years, reflecting what could be a pickup in auto making during a typically slow time of year.
Jobless claims fell by 19,000 to 284,000 in the week ended July 19, the fewest since February 2006 and lower than any economist surveyed by Bloomberg forecast, a Labor Department report showed Thursday in Washington. Applications can be volatile in July because of auto plant shutdowns, even as state data showed nothing inconsistent with prior years, a Labor Department spokesman said as the data was released to the press.
Fewer claims signal employers are reluctant to let go of staff as the talent pool shrinks and sales improve. A tightening labor market could lift wages and spur consumer spending, which accounts for about 70 percent of the economy.
“Make no mistake — the broader trend is definitely one for improvement,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York, who projected claims would drop. “But there’s an asterisk that needs to be assigned to this number, and that’s broadly true for claims in July.”
The median forecast of 50 economists surveyed by Bloomberg projected 307,000 claims would be filed last week. Estimates ranged from 295,000 to 320,000. The Labor Department revised the prior week’s reading to 303,000 from an initially reported 302,000.
While the Labor Department spokesman said there was nothing unusual in the figures and no states were estimated, the timing and extent of closings to re-tool auto factories for the new model year is typically difficult for the government to gauge, causing claims to gyrate at this time of year. It will probably take several weeks for the data to stabilize enough to signal whether firings are truly ebbing.
Michigan, New Jersey and Ohio were among states that reported the biggest decrease in claims in the week ended July 12 amid fewer firings in manufacturing and transportation industries. That may indicate more auto plants than usual remained open this year to meet improving demand.
“Today’s jobless claims data likely informs us more about production than employment,” Neil Dutta, head of U.S. economics at Renaissance Macro Research in New York, said in a note after the report. “Auto production is in overdrive at a time when factories are normally shutdown to retool for new makes and models. We would expect a significant pick-up in motor vehicle production and manufacturing employment in July.”
The four-week average of jobless claims, considered a less volatile measure than the weekly figure, decreased to 302,000, the lowest since May 2007, from 309,250 in the prior week.
The number of people continuing to receive jobless benefits declined by 8,000 to 2.5 million in the week ended July 12, the fewest since June 2007. The unemployment rate among people eligible for benefits held at 1.9 percent, today’s report showed. These data are reported with a one-week lag.
Employers added 288,000 jobs in June, lifting the average monthly advance so far in 2014 to almost 231,000. If that pace is sustained, it would be the best year since 1999.
The unemployment rate dropped last month to an almost six- year low of 6.1 percent.
A strengthening labor market is leading consumers to increase spending, spurring transactions at Bank of America Corp. The Charlotte, North Carolina-based bank saw an 8 percent growth in credit and debit card volumes and increased balances since the first quarter.
“While the economy still faces challenges, progress is being made throughout the economy but also throughout our company.” said Brian Moynihan, Bank of America Corp.’s chief executive officer during a second quarter earnings call on July 16. “As we have strong positions, leadership positions across consumer and commercial companies in America, we have a view into the key indicators of an improving economy, which show signs everywhere of improvement.”