New jobless report ‘mildly encouraging’

Frank Wallace, who has been unemployed since May of 2009 is seen during a rally organized by the Philadelphia Unemployment Project in Philadelphia recently. Unemployment applications dropped last week for the third time in four weeks (AP File Photo/Matt Rourke)

By Christopher S. Rugaber
AP Economics Writer

Washington — Applications for jobless benefits dropped last week for the third time in four weeks, a sign that employers are cutting fewer jobs.

New claims for jobless benefits fell by 16,000 to a seasonally adjusted 453,000, the Labor Department reported Thursday. Still, they are higher than they would be in a healthy economy and not low enough to signal rapid job growth.

The claims figures are “mildly encouraging” and “moving in the right direction,” said Michael Gapen, senior U.S. economist at Barclays Capital. But they need to fall to between 400,000 and 425,000 to indicate that hiring is picking up, he said.

Separately, the Commerce Department reported that economic growth slowed in the second quarter, to a 1.7 percent annual rate from 3.7 percent in the January-March quarter.

The second quarter figure is slightly higher than last month’s estimate of 1.6 percent. The modest upward revision was the result of a little more consumer spending than first estimated, but hardly enough to have a significant effect on the broader economy.

Most economists said they expect growth to be similarly weak in the July-September quarter, with estimates ranging between 1.5 percent and 2 percent. The government’s first report on third quarter gross domestic product will be released Oct. 29.

Jobless claims are at the same level they were two weeks ago. Initial claims have fluctuated around 450,000 for most of this year.

The four-week average of claims, a less-volatile measure, dropped for the fifth straight week to 458,000, the lowest level in two months.

Applications for unemployment benefits, while volatile, provide a real-time snapshot of the job market. The weekly claims figures are considered a measure of the pace of layoffs and an indication of companies’ willingness to hire.

Initial claims have fallen sharply since June 2009, the month the recession ended. They topped 600,000 at the end of that month. But most of that decline took place last year.

The economy has slowed sharply this year, discouraging many employers from hiring. Earlier this week, a survey by the Business Roundtable, a group of chief executives, found that only 31 percent of CEOs said they expected to increase their payrolls in the next six months, down from 39 percent in June. The June reading was the best since the recession began in December 2007.

Companies added a net total of 67,000 jobs last month, but that’s not nearly enough to reduce the unemployment rate, which is at 9.6 percent.