Initial jobless claims plunged last week to their lowest levels in more than four decades, according to a Thursday report from the Labor Department.
Initial claims represent unemployment benefit filings made by Americans who have either recently separated from their jobs or who had not yet registered for assistance programs. The weekly figures are considered to be early indicators of employers’ layoff patterns and help economists get a read on hiring and firing trends in the labor market.
Initial claims dropped to 255,000 last week, falling more than 9 percent from the week prior. And the four-week average, which is generally considered to be a less volatile measure of unemployment claims, fell to 278,500, or just over 1 percent, from the week prior. Initial claims have been below the 300,000 filing threshold for 20 consecutive weeks and only ticked up in California, North Dakota, Rhode Island and the District of Columbia.
Continuing claims, which run on a one-week delay and represent those who have already received their initial unemployment benefits, fell by 9,000 to about 2.2 million for the week ending July 11.
This all suggests that layoffs, in general, aren’t horribly commonplace in the current labor market. A separate Job Openings and Labor Turnover Survey released earlier in July showed seasonally adjusted layoffs and discharges drop more than 7 percent from April to May for the second straight month of declines — further supporting the notion that employers don’t seem to be eager to shed workers.
While jobless claims can be a great indicator for layoffs, they ironically don’t paint a very clear picture when it comes to unemployment. Not everyone who’s unemployed seeks benefits, and some people’s benefits expire for a variety of reasons after a certain period of time.
Only 255,000 people filed for initial claims last week, and 2.2 million filed continuing claims the week before. That’s only a fraction of the 8.3 million unemployed individuals across the country and the 93.6 million people not currently in the U.S. labor force.
People leave the labor force for any number of reasons, including retirement, full-time education or to take care of a child. Labor force participation isn’t always a completely accurate indicator of what’s going on in the labor market, and jobless claim numbers should also be taken with a grain of salt, especially considering the seasonal noise that goes into summer unemployment indicators when many automakers temporarily close up shop for maintenance work.
But this week’s number holds special significance to the Labor Department. In calculating monthly unemployment rates, the government typically uses only one week as a so-called survey week. That week generally corresponds with the 12th day of every month. Considering this week’s data spans claims filed between July 11 to July 18, it’s very possible that the July jobs report that will be released in a few weeks will show a markedly low unemployment rate.
And with September’s Federal Open Market Committee meeting right around the corner, a strong month of job growth and low unemployment could be the straw that breaks the camel’s back. This low jobless claims number could mark the beginning of the end of near-zero interest rates.
“The mixed signals make the Fed’s data-driven interest rate hike difficult to predict, though certainly the lower unemployment figures would indicate they hike sooner rather than later,” Tara Sinclair, chief economist at Indeed job search company, wrote in an email to U.S. News earlier this month.
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Low Jobless Claims Could be Harbinger of Higher Interest Rates originally appeared on usnews.com