The number of Americans filing new claims for unemployment benefits tumbled last week to its lowest level in nearly 15 years, adding to bullish signals on the labour market. Though the decline probably exaggerates the jobs market's strength given a holiday-shortened week, Thursday's report suggested the economy was fairly healthy and weathering weakening global growth.
"Claims are a welcome shot in the arm for those believing the economy is strong. The US remains an oasis of prosperity in the world and will continue to do so," said Chris Rupkey, chief financial economist at MUFG Union Bank in New York. Initial claims for state unemployment benefits dropped 43,000 to a seasonally adjusted 265,000 for the week ended January 24, the lowest since April 2000, the Labour Department said. It was the biggest weekly decline since November 2012. The drop exceeded economists' expectations for a fall to only 300,000, but last week also included the Martin Luther King holiday, which means fewer claims were likely processed.
The fall unwound the prior weeks' increases, which had pushed claims above the key 300,000 threshold. Economists had largely dismissed that rise as "noise," given difficulties adjusting the data for seasonal fluctuations at the start of the year. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 8,250 last week to 298,500.
US Treasury debt prices were trading lower, with the yield on the 30-year bond pushing off recent record lows. The dollar rose against a basket of currencies. US stocks fell as Alibaba Group's revenue missed Wall Street expectations. The latest decline in applications for unemployment benefits bolsters views of tightening labour market conditions and comes a day after the Federal Reserve ramped up its assessment of the labour market and the overall economy.
While the United States is bucking a weakening global economy, housing remains a soft spot. The National Association of Realtors said on Thursday signed contracts to purchase previously owned homes tumbled to an eight-month low in December. Separately, the Commerce Department said the homeownership rate dropped to a 20-year low in the fourth quarter as more Americans opted to rent rather than purchase homes.
But with the labour market firming and the government moving to ease credit conditions, housing should regain some speed. "We retain an optimistic outlook on housing, even as we caution that momentum is likely to remain choppy over the near-term," said Gennadiy Goldberg, an economist at TD Securities in New York. January's employment report next week is expected to show nonfarm payrolls increased 230,000 after rising 252,000 in December, according to a Reuters survey of economists. That would mark the 12th consecutive month of jobs gains above 200,000, the longest stretch since 1994.
The claims report showed the number of people still receiving benefits after an initial week of aid fell 71,000 to 2.39 million in the week ended January 17. The so-called continuing claims covered the period during which the government surveyed households for the unemployment rate. Continuing claims fell 22,000 between the December and January survey periods, suggesting another drop in the jobless rate, which is currently at a 6-1/2-year low of 5.6 percent.
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