WASHINGTON – Fewer people signed up for jobless benefits last week, an encouraging sign that businesses aren't taking major steps to scale back their work forces amid the ill effects of the housing slump and a painful credit crunch.
The Labor Department reported Thursday that new applications filed for unemployment insurance dipped by 2,000 to 322,000 for the week ending Aug. 18. It marked the first drop in new claims in roughly a month.
The showing was a bit higher than the 320,000 analysts were forecasting. Still, the level of claims suggested that the employment climate remains in fairly good shape despite problems in housing, tighter credit, and turmoil on Wall Street in recent weeks.
Meanwhile, the four-week moving average of claims, which smooths out week-to-week volatility, rose to 317,750 last week, an increase of 4,750 from the prior week. A year ago, these claims stood at 316,750.
The number of people continuing to collect unemployment benefits also went up by 16,000 to 2.57 million for the week ending Aug. 11, the most recent period for which that information is available. A year ago, this figure stood at 2.48 million.
So far, the national employment climate has managed to remain fairly sturdy despite job losses related to the deep housing slump, which has persisted for more than a year. The unemployment rate did edge up to 4.6 percent in July, a six-month high. Yet, the rate is still low by historical standards.
However, turbulence on Wall Street over credit problems in recent weeks has increased uncertainty and has the potential to restrain overall economic growth going forward, the Federal Reserve said last week.
"The downside risks to growth have increased appreciably," Fed Chairman Ben Bernanke and his colleagues concluded last Friday. It was a much more sobering assessment than they had offered just 10 days earlier when they met to examine economic conditions and interest rates. Against this backdrop, the central bank sliced the rate it charges banks for loans, a narrowly tailored move aimed at propping up sagging financial markets.
Questions remain about whether the Fed's discount rate cut and its pumping billions of dollars into the financial system in recent weeks will be sufficient. Investors and economists say the odds are growing that the Fed will lower an important interest rate, called the federal funds rate, on or before Sept. 18, its next regularly scheduled meeting. The Fed hasn't cut this rate in four years.
The funds rate, the interest banks charge each other on overnight loans, has stayed at 5.25 percent for more than a year. A cut to the funds rate would influence other interest rates charged to consumers and businesses. That's why it is the Fed's main lever for affecting overall economic activity.