U.S. Initial Jobless Claims Fell 5,000 to 299,000 Last Week
Carlos Torres in Washington
April 6 (Bloomberg) -- First-time applications for unemployment insurance in the U.S. unexpectedly dropped last week, and the total number of people on benefit rolls fell to a five-year low.
Initial jobless claims dropped by 5,000 in the week ended April 1 to 299,000, from 304,000 a week earlier, the Labor Department said today in Washington. The number of people continuing to collect state jobless benefits fell to 2.44 million in the week that ended March 25, the lowest since February 2001.
Businesses are reluctant to fire workers because an unemployment rate close to a four-year low makes it harder to find qualified employees. Corporate payrolls probably swelled by 190,000 last month, capping the strongest quarter for hiring in more than a year, economists forecast the Labor Department will report tomorrow.
``Claims are pointing to firm, if not firming, conditions in the labor market,'' Michael Gregory, a senior economist at BMO Nesbitt Burns in Toronto, said before the report. ``Corporate profits are just huge and businesses are in a position to expand.''
Jobless claims were expected to rise to 305,000 from an originally reported 302,000, according to a Bloomberg News survey of 37 economists. Estimates ranged from 298,000 to 315,000.
The four-week moving average of claims, a less volatile measure, dropped to 308,500 from 311,250 a week earlier.
Claims fell to a five-year low of 281,000 in mid January, when unseasonably warm temperatures kept construction companies and retailers busier than usual for that time of year, economists said. The increase in claims since then doesn't alter perceptions firings remain low.
Payrolls Report
Claims tend to fall as payrolls rise and together the two measures provide a good indication of how the labor market is faring. The forecast for the number of jobs created last month would bring the first-quarter increase in payrolls to 603,000, making it the biggest quarterly increase since the last three months of 2004.
The unemployment rate among people eligible for benefits, which tends to track the U.S. jobless rate, held at 1.9 percent in the week ended March 25. The Labor Department also said 32 states and territories reported a decrease in new claims, while 21 reported an increase. These data are reported with a one-week lag.
Customer Service
United Airlines, the world's second-largest carrier, said last week it plans to hire as many as 4,000 employees this year as it invests in customer service and replaces workers who left during three years in bankruptcy. Parent UAL Corp. exited bankruptcy on Feb. 1 with about 53,200 workers, almost 24,000 fewer than when it entered Chapter 11 protection in December 2002.
Best Buy Co., the largest U.S. electronics retailer, is adding workers while also focusing on trying to keep current employees. The Richfield, Minnesota-based retailer said last week it plans to hire 1,000 employees to boost sales of high-end home theater systems.
Retaining employees was one of five goals Best Buy set out to accomplish last year, Chief Executive Officer Brad Anderson said in a conference call with investors. The rate of employee turnover dropped to 69 percent in the quarter ended Feb. 25 from 81 percent at the same time last year, he said.
``Our focus on human capital and the creation of broad incentive programs for employees, which we call Beaucoup Bucks, led to the improvement,'' Anderson said on the call.
`Inflection Point'
Such financial incentives are one example of how the recent drop in claims suggests the labor market has reached an ``inflection point'' that will contribute to bigger wage gains in coming months, according to a report last week by Michael Feroli, an economist at JPMorgan Chase Bank in New York.
Businesses are adding to payrolls by poaching workers from other companies and doing all they can to retain their current staff, Feroli said, citing figures from the government's monthly survey on job openings and labor turnover.
People quitting work represented the biggest portion of job separations in January than at any time since the government started keeping records in December 2000, according to the Labor Department's survey. Separations include firings and people who voluntarily leave their jobs.
``Workers who voluntarily leave their jobs do so with the prospect of an improvement in their compensation,'' Feroli said. ``Although the very low level of claims does not necessarily point to further acceleration in job growth, it does portend a pickup in earnings'' because it will take fatter paychecks to entice people away from other jobs, he said.
Hourly Earnings
Workers' average hourly earnings in February were up 3.5 percent from the same month last year, the biggest 12-month gain since September 2001. Rising wages may stoke inflation as businesses raise prices to offset higher wage costs.
Federal Reserve policy makers last week increased their target interest rate to 4.75 percent and held out the prospect of further increases. They cited ``possible increases in resource utilization,'' a phrase economists say refers to low unemployment.
Carlos Torres in Washington
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