The number of Americans filing for unemployment benefits unexpectedly fell last week, hitting its lowest level since 1973, suggesting an apparent sharp slowdown in economic growth in the first quarter could be temporary.
While another report on Thursday showed a mild weakening in factory activity in the mid-Atlantic region in April, manufacturers were fairly upbeat about business prospects in the next six months. This, together with labor market buoyancy bodes well for a pick-up in economic growth in the second quarter.
“The labor market continues to improve. If the apparent slowing in GDP in the first quarter was truly a sudden change in trend, we should have seen something happen in claims by now,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.
Initial claims for state unemployment benefits declined 6,000 to a seasonally adjusted 247,000 for the week ended April16, the lowest reading since November 1973, the Labor Department said. Economists polled by Reuters had forecast claims rising to263,000 in the latest week.
Jobless claims have now been below 300,000, a threshold associated with healthy labor market conditions, for 59 weeks, the longest stretch since 1973. Labor market strength comes despite signs that growth stumbled in the first quarter.
The economy has been hurt by a strong dollar and weak global demand, which have eroded exports. Lower oil prices are also a constraint, as they have undercut the profits of energy firms, forcing them to slash spending on capital projects.
There is also a tendency for reported growth to weaken in the first three months of the year because of measurement challenges, which have been acknowledged by the government.
First-quarter gross domestic product growth estimates are currently as low as a 0.2 percent annualized rate. The economy grew at a 1.4 percent rate in the fourth quarter.