WASHINGTON – A surprise drop in new claims for U.S. jobless benefits hinted at a healthier labor market, but a fall in a gauge of future economic activity pointed to slower economic growth this summer, data released Thursday showed.
Initial filings for state unemployment insurance aid fell for the fifth straight week to the lowest level since mid-January, while a less-volatile measure of the labor market fell to its lowest in more than a year.
The number of new claims filed dropped 5,000 to a seasonally adjusted 293,000 in the week ended May 12 from a revised 298,000 for the prior week, the Labor Department said.
The four-week moving average of claims, which smooths weekly volatility to provide a better sense of underlying job-market trends, fell for the third consecutive week, dropping to 305,500 from 317,500 in the prior week and to its lowest since April, 2006.
The New York-based Conference Board's measure of leading economic indicators declined a greater-than-expected 0.5 percent in April after a 0.6 percent increase in March. Economists had forecast a 0.1 percent drop.
"With the industrial core of the economy already slow, and housing mired in a continued slump, there are some signs that these weaknesses may be beginning to soften both consumer spending and hiring this summer," Ken Goldstein, labor economist for the Conference Board, said in a statement.
LOOKING ON THE BRIGHT SIDE
Markets shrugged off the weak leading index and focused instead on the surprising drop in jobless claims, which suggested the economy might have more forward momentum than had been thought.
U.S. government bond prices slipped and the dollar rose, while stocks edged down on views the healthy jobs data could diminish chances for interest rate cuts by the Federal Reserve.
"What this data does is boost the forecast for the next payrolls figure," said Tim Mazanec, senior currency strategist for Investors Bank & Trust in Boston.
"The last few have shown fewer than 100,000 new jobs and this should get us back above that," Mazanec said.
The U.S. economy added a modest 88,000 jobs in April, the slimmest gain in more than two years, the Labor Department reported in its monthly data released on May 4.
However, some economists said more data is needed to confirm a pickup in the jobs market
"Overall, I think the big picture is that we're seeing weakness in employment," said Camilla Sutton, currency strategist for Scotia Capital in Toronto. "This doesn't change that, and we have to see more data points before we see any change in the market's thinking."
A Labor Department analyst said there were no special factors behind the drop in new claims.
Analysts on Wall Street had expected claims, which provide a rough guide to the pace of layoffs, to rise to 310,000 from the 297,000 initially reported for the May 5 week.
The total number of unemployed still on the benefit rolls after drawing an initial week of aid fell to 2.47 million in the week ended May 5, the latest period for which figures are available. Economists had forecast so-called continued claims at 2.53 million.