US jobless claims drop to five year low of 330,000

Thursday 24 January 2013 15.29
US employers cutting fewer jobs and increasing their hiring
US employers cutting fewer jobs and increasing their hiring

The number of Americans seeking unemployment aid fell last week to the lowest level in five years, evidence that employers are cutting fewer jobs and may step up hiring.

The Labor Department said today that weekly unemployment benefit applications dropped 5,000 to a seasonally adjusted 330,000.

That is the fewest since January 2008.

The four-week average, a less volatile measure, fell to 351,750 - the lowest in nearly five years.

The decline may reflect the government's difficulty adjusting its numbers to account for layoffs after the Christmas shopping season. Layoffs spike in the second week of January and then plummet. The department seeks to adjust for those seasonal trends, but the figures can still be volatile.

If the trend holds up, fewer applications would suggest the job market is improving.

Applications are a proxy for layoffs. They have fluctuated between 360,000 and 390,000 for most of last year. At the same time, employers added an average of 153,000 jobs a month. That is just been enough to slowly push down the unemployment rate, which fell 0.7 percentage points last year to 7.8%.

There have been other positive signs for the US economy and job market. The once-battered housing sector is recovering, which is boosting construction and home prices. Home builders started work in 2012 on the most new homes in four years. And sales of previously occupied homes reached their highest level in five years last year.

But home building and sales remain below the levels consistent with a healthy economy. More home building will likely increase job growth. In December, the economy gained 30,000 construction jobs - the most in 15 months. And economists expect construction firms to add more jobs this year as the housing recovery strengthens.

The overall US economy grew at an annual rate of 3.1% in the three months from July to September. But economists believe activity slowed considerably in the October-December quarter to a rate below 2% or less, in part because companies cut back on restocking. Less restocking leads to slower factory production, which weighs on economic growth.