WASHINGTON: The number of Americans filing applications for unemployment benefits dropped from a more than two-year high last week, pointing to sustained labour market strength that should continue to underpin consumer spending and the economy.
While other data showed factory activity in the mid-Atlantic region almost stalling this month, manufacturers received more orders, increased shipments and boosted hours for employees. Their outlook for capital expenditure over the next six months was also upbeat, offering some tentative signs of stabilisation in manufacturing amid an easing in tensions in the 17-month trade war between the United States and China.
The trade tensions have bruised business confidence and weighed on capital expenditure, leading to a downturn in national manufacturing activity. But a turnaround in manufacturing, which accounts for 11 per cent of the economy, could be delayed. Boeing announced on Monday it would suspend production of its best-selling 737 MAX jetliner in January as fallout from two fatal crashes of the now-grounded aircraft drags into 2020.
Economists estimated that Boeing’s biggest assembly-line halt in more than 20 years, which is expected to wreak havoc on supply chains, could cut first-quarter 2020 gross domestic product growth by at least half a percentage point.
“The economy isn’t going off the rails here,” said Chris Rupkey, chief economist at MUFG in New York. “But at the same time, it isn’t setting any land speed records.” Initial claims for state unemployment benefits decreased 18,000 to a seasonally adjusted 234,000 for the week ended December 14, the Labour Department said.
The drop, which only partially unwound the prior week’s jump of 49,000, likely does not indicate a material shift in labour market conditions as claims data tend to be volatile in the period following the Thanksgiving Day holiday.
The surge in the week ended December 7, which boosted claims to 252,000 — the highest reading since September 2017 — probably reflected a late Thanksgiving Day this year compared to 2018. That could have thrown off the model used by the government to strip out seasonal fluctuations from the data.
Economists had forecast claims would fall to 225,000 in the latest week. They expect claims to remain elevated relative to October’s low reading given volatility in the data around the holiday season and end of the year.
“At this point we are not concerned about the rise in initial claims and view it as a statistical quirk related to the seasonal adjustment process around Thanksgiving,” said John Ryding, chief economist at RDQ Economics in New York.
A second report on Thursday from the National Association of Realtors showed existing home sales dropped 1.7 per cent in November. Home resales, however, increased 2.7 per cent from a year ago. The solid labour market and low mortgage rates are driving demand for housing.
The dollar was steady against a basket of currencies, while prices for longer-dated US Treasuries fell. Stocks on Wall Street were trading higher. Financial markets were unmoved by the impeachment late on Wednesday of President Donald Trump, who is unlikely to be removed from office.
The four-week moving average of initial claims, considered a better measure of labour market trends as it irons out week-to-week volatility, rose 1,500 to 225,500 last week — still consistent with a strong labour market.
Last week’s data covered the period during which the government surveyed businesses for the nonfarm payrolls component of December’s employment report. — Reuters
Oman Observer is now on the WhatsApp channel. Click here
