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US Jobless Claims Fall to Lowest Level since 2007 as Labour Market Continues to Tighten

H.S. Borji
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US Jobless Claims Fall to Lowest Level since 2007 as Labour Market Continues to Tighten

First time applications for unemployment benefits declined faster than forecast last week, offering further evidence the US labour market was tightening at the end of the third quarter despite a slower rate of job growth in August.

US jobless claims declined 36,000 to 280,000 in the week ended September 13, the lowest level since July and the biggest single-week drop in nearly two years, the Labor Department reported today in Washington. A median estimate of economists called for a drop to 305,000.

The drop reverses a rise of 12,000 in the previous week that coincided with the annual Labour Day holiday.

The less volatile four-week average for jobless claims declined 4,750 to 299,500, official data showed.

Meanwhile, continuing jobless claims declined 63,000 to 2.429 million in the week ended September 6, the lowest level since May 2007.

Jobless claims are a narrower measure of unemployment that are used to gauge the pace of firings in the labour market. The weekly report captures the number of Americans filing first-time claims for unemployment benefits. Declining jobless claims suggests businesses are confident enough to retain staff, which means they are also more likely to hire.

Thursday’s report suggests employers are retaining workers at a higher rate, as the US economy continues to improve. The US economy rebounded sharply in the second quarter, growing at an annual rate of 4.2 percent. That followed a disastrous first quarter that saw gross domestic product decline 2.1 percent from year-ago levels.

The economy is expected to grow more than 3 percent annually in the September quarter.

Thursday’s data also alleviated concerns the job market was cooling after employers added only 142,000 nonfarm payrolls in August, the smallest increase in eight months. That snapped six consecutive months of job growth above 200,000. The unemployment rate declined to 6.1 percent from 6.2 percent in August, as more people existed the labour force. The labour force participation rate declined to 62.8 percent from 62.9 percent.

The unemployment rate has tumbled 1.1 percentage points since August 2013. At 6.1 percent, however, the national unemployment rate is still considered high by historical standards.

The unemployment rate for recipients of jobless benefits declined to 1.8 percent from 1.9 percent in the week ended September 13, the lowest level since November 2006.

The Federal Reserve on Wednesday tapered bond purchases by another $10 billion to $15 billion, as expected, but pledged to keep interest rates low for a “considerable time” to combat “significant underutilization of labor resources” in the economy.

The Fed, which is expected to make one final cut of $15 billion at the October policy meetings, has held interest rates at 0.25 percent since the end of 2008. The central bank also downgraded its 2014 growth outlook to between 2 percent and 2.2 percent, compared to a rise of 2.1 percent to 2.3 percent in the previous forecast. Policymakers also lowered their outlook for 2015 to between 2.6 percent and 3 percent, versus a rise of 3 percent to 3.2 percent in the June numbers.

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