RTTNews - First-time claims for unemployment benefits showed a much bigger than expected decrease in the week ended August 1st, according to a report released by the Labor Department on Thursday, with the data offsetting some of the recent concerns about the outlook for the labor market.
The report showed that initial jobless claims fell to 550,000 from the previous week's revised figure of 588,000. Economists had been expecting jobless claims to edge down to 580,000 from the 584,000 originally reported for the previous week.
While initial claims remain off the six-month low of 524,000 set in the week ended July 11th, the Labor Department noted that the data no longer includes the seasonal issues in the auto sector that skewed the data artificially lower.
Additionally, the report showed that the less volatile four-week moving average fell to 555,250 from the previous week's revised average of 560,000.
With the decrease, the four-week moving average extended a recent decline, falling for the sixth consecutive week to reach a new six-month low. The moving average has not been lower since coming in at 547,00 in the week ended January 24th.
At the same time, the Labor Department also said that continuing claims rose to 6.310 million in the week ended July 25th from the preceding week's revised level of 6.241 million.
Commenting on the data, Peter Boockvar, equity strategist for Miller Tabak, said, While the drop in initial claims is welcome, as the pace of firing seems to be slowing, the other data points still point to a difficult hiring environment.
Initial claims though do lead continuing claims and we'll see how long the transition is between a slowdown in firing to a pickup in hiring, he added.
The labor market has been a significant source of concern in recent months, although recent reports have shown some stabilization in the rate of job losses.
On Wednesday, payroll processor Automatic Data Processing, Inc. (ADP) released a report showing another notable decline in private sector employment in the month of July, although the pace of job losses slowed to its slowest rate since October of 2008.
The report showed that non-farm private employment fell by 371,000 jobs in July following a revised decrease of 463,000 jobs in June. Economists had been expecting a decrease of about 350,000 jobs compared to the loss of 473,000 jobs originally reported for the previous month.
ADP said that the drop in jobs in July was the smallest since of a decrease of 352,000 jobs in October of 2008, adding that the decrease continues the notable improvement seen between the first and second quarters of 2009.
However, the payroll processor said that employment is likely to decline for at least several more months despite recent indications that overall economic activity is stabilizing, as employment usually trails overall economic activity
The Labor Department is due to release its more closely watched monthly employment report on Friday.
The report, which includes government jobs, is expected to show a decrease of 328,000 jobs in July following a decrease of 467,000 jobs in June. The unemployment rate is expected to edge up to a twenty-six year high of 9.6 percent from 9.5 percent.
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