Log In | Register
WASHINGTON — Fewer people are claiming jobless benefits, leading economists to project that next week's employment report will show a sharp drop in job losses for July compared with June.
Claims for jobless aid, which track layoffs and firings, are trending downward in a modest sign of improvement in the labor market, economists note.
That helps explain why analysts are forecasting that a net total of about 340,000 jobs will be lost in July. This would compare with a net total of 467,000 jobs lost in June and the staggering 741,000 that were lost in January — the most for any month since 1949.
The slowdown in job cuts is a positive sign for the labor market, though most economists still expect the unemployment rate to keep rising into next year. The jobless rate, which reached 9.5 percent in June, is widely expected to top 10 percent by year's end.
The latest figures show "there has been some improvement in the job market this summer," David Resler, chief economist at Nomura Securities, wrote in a research note.
Still, the overall economy continues to struggle. The government on Friday will make its first estimate of the gross domestic product — the value of all goods and services produced in the United States — for the second quarter of this year. Many analysts predict the economy shrank at an annual rate of 1.5 percent from April through June, an improvement from the first quarter.
President Barack Obama told reporters Thursday that while he expects the report to show the economy contracted last quarter, the United States has "stepped away from the precipice."
Obama cited reasons to remain upbeat. Job losses have slowed from the pace of January and February, after he took office. And he says housing prices are rising for the first time in three years.
The number of newly laid-off workers filing first-time claims for jobless benefits rose last week, the Labor Department said Thursday, but the increase was mostly due to seasonal distortions.
Initial claims for unemployment aid rose by 25,000 to a seasonally adjusted 584,000, above analysts' estimates. Still, that figure is below the 617,000 new claims filed in late June — before the figures began to be distorted by a shift in the timing of temporary auto shutdowns.
Initial claims are likely to remain in the "mid to upper 500s" for several more weeks, Resler wrote, and then gradually decline as the job market improves further.
One sign that new claims are trending downward is that the four-week average of claims, which smooths out fluctuations, fell to 559,000. That's its lowest level since late January.
And the number of people remaining on the jobless benefit rolls fell for the third straight week, from 6.25 million to 6.2 million, the lowest level since mid-April. The figures on continuing claims lag behind those for initial claims by a week.
Many employers "have already trimmed as much they need to and are in wait-and-see mode," said Benjamin Reitzes, an economist at BMO Capital Markets.
Reitzes said his firm has moved up its forecast for when the economy will see actual job growth. The firm now expects job creation to begin in the fourth quarter of this year, revised from a previous forecast of early next year.
That revision results from other positive economic data in addition to jobless claims, he said. The government, for example, said this week that new-home sales jumped in June by the largest amount in more than eight years.
Resler points out that Chrysler LLC reopened seven plants in late June, a move that will probably reduce July's job losses in the manufacturing sector.
Construction payrolls also may not fall as much as in previous months, he said. That's because home construction has rebounded from recent lows. Resler projects that a net total of 250,000 jobs will be lost in July — even fewer than the consensus estimate of economists.
Still, most companies are reluctant to hire — and are expected to remain so well into next year and possibly beyond. Employers will "hold off on hiring as long as they can, until they're sure the economy is going in the direction they want," Reitzes said.
Stocks surged as both the new data on jobless claims and better-than-expected earnings handed investors the latest evidence that the economy could be strengthening. The Dow Jones industrial average rose about 83 points, nearly 1 percent, and broader stock averages also gained sharply.
The Labor Department data, while encouraging, doesn't dispel the broad weakness in the job market. Weekly jobless claims remain far above the 300,000 to 350,000 that analysts say is consistent with a healthy economy. New claims last fell below 300,000 in early 2007.
And the total number of jobless benefit recipients is much higher when federal emergency programs are included. Congress has added up to 53 extra weeks of benefits on top of the 26 typically provided by the states.
Including those extended programs, a record high of 9.27 million people received unemployment benefits in the week that ended July 11, according to the most recent data available.
The increase in initial claims last week was mostly due to seasonal distortions, stemming from a move by auto companies to shut their plants earlier than usual this year. Car makers normally close their factories in early July and temporarily lay off thousands of workers as they retool plants to build new car models.
This year, those shutdowns happened in May and June as General Motors Corp. and Chrysler LLC closed plants after filing for bankruptcy protection. That shift in timing caused new claims to fall sharply in the first two weeks of July.
Claims have now rebounded from that artificial decline, a Labor Department analyst said. Next week's numbers aren't expected to be affected.
The recession, which began in December 2007 and is the longest since World War II, has eliminated a net total of 6.5 million jobs. The unemployment rate is expected to rise to 9.7 percent when the July figure is reported next week.
More job cuts were announced this week. Verizon Communications Inc. said Monday that it would cut more than 8,000 employee and contractor jobs before the end of the year.
