More Americans than projected filed applications for unemployment benefits last week, which may raise concern the slowdown in economic growth is prompting an increase in firings.
Jobless claims jumped by 32,000 to 360,000 in the week ended May 11, exceeding all forecasts in a Bloomberg survey of economists and the most since the end of March, Labor Department figures showed today in Washington. A Labor Department spokesman said no state provided information explaining the surge in applications which was the biggest since the aftermath of superstorm Sandy in November.
Job dismissals need to keep declining to lay the ground for a pickup in hiring once companies see growth in sales. The lack of bigger gains in employment, at a time Americans are faced with a higher payroll tax, will make it harder for households to sustain spending, the biggest part of the economy.
“It’s a reflection of what’s happening in the economy,” Millan Mulraine, an economist for TD Securities USA LLC in New York, said before the report. “Growth has slowed. We’re likely to see the labor market going sideways until there’s an improvement in demand.”
The median forecast of 50 economists surveyed by Bloomberg called for a rise to 330,000. Estimates ranged from 315,000 to 355,000. The Labor Department revised the previous week’s figure to 328,000 from an initially reported 323,000.
The four-week moving average, a less volatile measure than the weekly figures, rose to 339,250 last week from 338,000.
The cost of living in the U.S. fell in April for a second month, the first back-to-back declines in inflation since late 2008, as fuel costs retreated, another Labor Department report showed today.
The consumer-price index decreased 0.4 percent after declining 0.2 percent in March. Economists surveyed by Bloomberg projected a 0.3 percent decrease, according to the median estimate. The so-called core price measure, which excludes more volatile food and energy costs, increased 0.1 percent, less than projected.
Housing starts fell more than forecast in April to a five-month low, indicating a pause in the industry’s progress as builders slowed work on apartments, a Commerce Department report also showed today. At the same time, building permits surged to an almost five-year high.
Housing starts slumped 16.5 percent, the most since February 2011, to an 853,000 annualized rate after a revised 1.02 million pace in March. The median estimate of 81 economists surveyed by Bloomberg was for a 970,000 rate.
Stock-index futures dropped after the reports. The contract on the Standard & Poor’s 500 Index maturing in June fell 0.1 percent to 1,652.2 at 8:36 a.m. in New York. The S&P 500 closed at a record 1,658.78 yesterday.
The number of people continuing to receive jobless benefits fell by 4,000 to 3.01 million in the week ended May 4, according to the report on applications for jobless benefits. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments increased by about 29,000 to 1.79 million in the week ended April 27.
The unemployment rate among people eligible for benefits held at 2.3 percent in the week ended May 4, today’s report showed.
Twenty-eight states and territories reported a decrease in claims, while 25 reported an increase. These data are reported with a one-week lag. The Labor Department spokesman said several states reported large swings in claims last week, both up and down, ascribing it to typical volatility.
Initial jobless claims reflect weekly firings and tend to fall as job growth — measured by the monthly non-farm payrolls report — accelerates.
Procter & Gamble Co. (PG), the Cincinnati-based maker of Gillette razors and Tide detergent, is among companies paring headcount. As of the end of March, P&G had reduced 6,250 positions, Chief Financial Officer Jon Moeller said on an earnings call on April 24. That’s ahead of its target under a previously-announced cost-cutting plan that called for a reduction in non-manufacturing staffing of 10 percent, or about 5,700, by the end of the fiscal year that ends June 30, he said.
Declining dismissals, combined with a sustained pickup in hiring, are needed help spur consumer spending, which accounts for about 70 percent of the economy.
Bigger gains in payrolls would help to more quickly reduce the unemployment rate, which fell in April to a four-year low of 7.5 percent.
Growth in the U.S. remains too sluggish to cut the jobless rate quickly, leaving it a “long way” from satisfactory levels, former Federal Reserve Chairman Paul Volcker said this week. The unemployment rate may remain above 6 percent for at least another two years, he said at an event in New York.
The economy may cool to a 1.6 percent pace this quarter, after growing at a 2.5 percent rate in the first three months of 2013, according to the median forecast in a Bloomberg survey of economists from May 3 to May 8. The projection reflects the lagged effect from a two percentage-point rise in the payroll tax at the start of 2013 and $85 billion in automatic budget cuts that began on March 1.
For now, consumers are holding up as lower fuel costs combined with rising stock and home values boost buying power. Sales at retailers unexpectedly advanced in April, rising 0.1 percent after a decrease of 0.5 percent in March, a report showed earlier this week.