RTTNews - First time claims for unemployment benefits continued to decrease in the week ended July 11th, according to a report released by the Labor Department on Thursday, with initial jobless claims falling by more than economists had been expecting.
The report showed that jobless claims fell to 522,000 from the previous week's revised figure of 569,000. Economists had been expecting jobless claims to fall to about 530,000 from the 565,000 originally reported for the previous week.
With the decrease, jobless claims fell further below the 600,000 level, falling to their lowest level since coming in at 508,000 in the week ended December 27th.
However, analysts have pointed out that seasonal issues in the auto sector have continued to impact jobless claims, skewing the data artificially lower.
Peter Boockvar, equity strategist at Miller Tabak noted, Because Chrysler and GM shut plants over the past few months due to their bankruptcies and just restarted them, we aren't going to see the seasonal July shutdowns.
Nonetheless, the report also showed that the less volatile four-week moving average fell to 584,500 from the previous week's revised average of 607,000.
The Labor Department also said that continuing claims plunged by a record 642,000 in the week ended July 4th. Continuing claims fell to 6.273 million from a record high 6.915 million in the preceding week, although the seasonal issues in the auto sector contributed to the steep drop.
While the irregularities in the auto sector have affected the numbers, the notable declines may still generate some optimism about a stabilization in the labor market.
The labor market has been a significant source of concern in recent months, with the Labor Department's monthly employment report released earlier this month showing a much bigger than expected decrease in employment in June.
The report showed that non-farm payroll employment fell by 467,000 jobs in June following a revised decrease of 322,000 jobs in May. Economists had expected a decrease of about 365,000 jobs compared to the loss of 345,000 jobs originally reported for the previous month.
With the bigger than expected decrease in employment, the unemployment rate edged up to 9.5 percent in June from 9.4 percent in May.
On Wednesday, the minutes of the Federal Reserve's June meeting showed that the central bank now expects the unemployment rate to come in higher than previously anticipated despite an improvement in the outlook for the overall economy.
The estimates for the unemployment rate in 2009 were revised to up to 9.8 to 10.1 percent from the previous estimate of 9.2 to 9.6 percent, while the unemployment rate in 2010 is now expected at 9.5 to 9.8 percent compared to the previous estimate of 9.0 to 9.5 percent.
The Fed added that FOMC participants foresaw only a gradual improvement in labor market conditions in 2010 and 2011, leaving the unemployment rate at the end of 2011 well above the level they viewed as its longer-run sustainable rate.
At the same time, the Fed said it now expects GDP to contract by 1.0 to 1.5 percent in 2009 compared to the previous estimate for a 1.3 to 2.0 percent decline.
Additionally, GDP in 2010 is now expected to increase by 2.1 to 3.3 percent, an upward revision from the previous estimate of 2.0 to 3.0 percent growth.
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