The number of Americans filing for unemployment benefits fell last week to near a 43-year low, suggesting labour market resilience even though hiring slowed sharply in May. Other data on Thursday also gave a fairly upbeat assessment of the economy after it stumbled in the first quarter. Manufacturing activity rose to a three-month high in early June. Although new single-family home sales dropped last month from a more than eight-year high in April, the trend remained consistent with a firming housing market.
"Today's data suggest that growth has bounced back in the second quarter," said Ryan Sweet, senior economist at Moody's Analytics in West Chester, Pennsylvania. Initial claims for state unemployment benefits declined 18,000 to a seasonally adjusted 259,000 for the week ended June 18, the Labour Department said. The drop was the largest since February and left claims not too far from 253,000, a 43-year low touched in March.
Claims have now been below 300,000, a threshold associated with a strong job market, for 68 straight weeks, the longest streak since 1973. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 2,250 to 267,000 last week. The drop in jobless claims could give Federal Reserve officials more confidence that job growth will pick up. Fed Chair Janet Yellen told lawmakers on Tuesday that the US central bank believed the slowdown in nonfarm payroll gains was "transitory," noting that "several other timely indicators of labour market conditions still look favourable."
"Overall labour market conditions are not as bad as one might assume based on May's nonfarm payroll print alone," said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan. US financial markets were little moved by the data ahead of the results of Britain's referendum on European Union membership late on Thursday. The dollar was trading lower against a basket of currencies, while US stocks rose. Prices for US government debt fell.
The claims report covered the survey period for June nonfarm payrolls. The four-week average of claims declined 8,750 between the May and June survey periods, suggesting an improvement in job growth after payrolls increased only 38,000 in May - the smallest increase since September 2010. "The May to June improvement points to a lower pace of firings in June. Our June payrolls forecast is 180,000," said Ted Wieseman, an economist at Morgan Stanley in New York.
Labor market optimism, which is also being spurred by near record high job openings, was bolstered further by a second report on Thursday showing a jump in manufacturing activity and factory employment early this month. Data firm Markit said its flash US manufacturing PMI increased to 51.4 from a reading of 50.7 in May. The rise was driven by a surge in production, which encouraged manufacturers to hire more workers. The gain in the Markit PMI suggests that the worst of the manufacturing rout is probably over.
While a third report from the Commerce Department showed single-family home sales fell 6.0 percent to a seasonally adjusted annual rate of 551,000 units last month, the drop followed a 12.3 percent surge in April, which had propelled sales to their highest level since February 2008.
New home sales were up 8.7 percent from a year ago and the three-month moving average was the highest since April 2008. "Consumers have not retrenched. The spring selling season was solid ... builders indicate they are supply constrained, not demand constrained," said Michelle Girard, chief economist at RBS in Stamford, Connecticut. "This suggests the strength seen in new home sales this spring may well be sustained throughout the summer." The housing market is being underpinned by the tightening labour market, which is starting to lift wages, a well as very low mortgage rates.
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