US joblessness declines, sets the stage for next week
The number of Americans filing for unemployment benefits unexpectedly fell last week, according to the Labor Department. Jobless claims for the week ending September 20 fell by 5,000 to 305,000, signalling further progress in the nation’s labour market. The median forecast called for an increase of 15,000 jobless claims over the previous week, according to a Bloomberg survey of 49 economists.
Declining jobless claims is a sign employers are less likely to lay-off workers, signalling a more optimistic outlook on the demand side. Thursday’s release sets the stage for next week’s official payroll numbers, with the Labor Department scheduled to release official employment data for the month of September. Initial estimates call for 177,000 jobs to have been created in September, compared to 169,000 the previous month.
The pace and timing of Federal Reserve monetary policy will depend largely on US employment growth during the next few months, making next week’s data of critical importance. Employment growth during the summer underwhelmed Fed officials, who surprised markets last week after deciding to keep the pace of asset purchases the same.
Despite Thursday’s surprising jobless report, Americans are growing more concerned about labour market prospects, according to the Conference Board’s latest confidence index. The index fell to its lowest reading since May, with the share of Americans who said jobs would grow in the next six months falling from 17.5 percent to 16.9 percent in September.
The outlook on Fed policy will continue to be centred on job growth. Fed Chairman Ben Bernanke has tied forward guidance to the unemployment rate, proclaiming the central bank won’t raise interest rates so long as unemployment is above 6.5 percent and inflation remains below 2.5 percent. Although US unemployment fell to 7.3 percent in August, analysts warn it’s for the wrong reasons. Labour force participation—the rate of people working or actively looking for a job—is at 63.2 percent, a 35-year low.
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