The number of Americans filing for jobless benefits fell last week and layoffs in December were the smallest in 15-and-a-half years, pointing to labour market strength even as growth appears to have slowed sharply in the fourth quarter.
Coming on the heels of a Wednesday report showing private payrolls in December notched their biggest increase in a year, the data yesterday suggest that the economy’s fundamentals remain healthy as it struggles against the headwinds of a strong dollar, bloated inventories and energy sector investment cuts.
“The data are supportive of continued job gains. You don’t go into a recession with jobless claims and layoffs at these low levels,” said Jacob Oubina, senior economist at RBC Capital Markets in New York.
Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 277,000 for the week ended January 2, the Labour Department said.
The decline partially unwound the prior week’s jump, which had lifted claims to their highest level since early July. Last week was the 44th straight week that claims held below 300,000, which is associated with a healthy labour market.
That is the longest run since the early 1970s.
The four-week moving average of claims, considered a better measure of labour market trends as it strips out week-to-week volatility, slipped 1,250 to 275,750 last week.
The encouraging news comes ahead of the release today of the closely-watched employment report for December.
According to a Reuters survey of economists, non-farm payrolls likely increased 200,000 in December, on top of the 211,000 jobs added in November.
The unemployment rate is seen unchanged at a seven-and-a half-years low of 5%.
“The current [claims] data continue to indicate that US labour markets are fundamentally healthy.
"We expect a similar read from tomorrow’s December employment report,” said Jesse Hurwitz, an economist at Barclays in New York.
Should the December employment report meet expectations, it could calm fears over the US economy and ease some pressure on global equity markets, which have suffered a selloff this week on concerns about the impact of slowing growth in China on the world economy.
Weak reports on US manufacturing, construction spending, car sales, and export growth prompted economists this week to slash their fourth-quarter GDP growth estimates by as much as one percentage point to as low as a 0.5% annual pace.
The economy grew at a 2% annual rate in the third quarter.
US stocks were trading lower yesterday, also as a continued decline in oil prices rattled investors.
The dollar weakened against a basket of currencies and prices for longer-dated US government debt fell.
In a separate report, global outplacement consultancy Challenger, Gray & Christmas said employers announced plans to cut 23,622 jobs in December, the fewest since June 2000.
That was down 24% from November and the lowest December job-cut total on record.
For all of 2015, announced layoffs totalled 598,510, the most since 2011.
Job cuts last year were mostly driven by the energy sector, which has been roiled by a collapse in oil prices, as well as layoffs in the military.
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