WASHINGTON – Fewer people sought U.S. unemployment benefits last week, evidence that layoffs are scarce and employers are likely hiring at a solid clip.
THE NUMBERS: Weekly applications for unemployment aid slipped 4,000 to a seasonally adjusted 262,000, the Labor Department said Thursday. The four-week average, typically a less volatile measure, rose 3,000 to 265,250.
The number of people receiving benefits ticked up 15,000 to 2.18 million. That’s nearly 4 per cent lower than a year earlier.
THE TAKEAWAY: Applications are a proxy for layoffs. They have remained below 300,000 for 76 straight weeks, the longest streak since 1970. The low readings are more impressive given the growth in the U.S. population since then.
While layoffs have fallen, hiring has improved. Employers added 255,000 jobs in July, after a strong 292,000 in June, the most in eight months. More Americans earning paychecks should boost growth in the coming months.
KEY DRIVERS: The economy expanded at a sluggish pace in the first six months of this year, growing at a tepid 1 per cent annual rate. Some of that weakness occurred because companies cleared out stockpiles of goods in their warehouses and on store shelves, and therefore ordered fewer new products.
With inventories lower and Americans still se, most economists now forecast growth will rebound in the July-September quarter to about a 2.5 per cent annual pace.
Still, solid hiring amid slow growth is a cause for concern. It indicates that the economy is less productive, with more workers needed to produce the same or slightly more output. Productivity, or the amount of output per hour, has expanded just 0.6 per cent a year for the past five years. That’s the slowest five-year pace since the early 1980s.
Tepid productivity growth could hobble the U.S. economy and keep a lid on pay gains. Greater productivity allows companies to boost workers’ pay without raising prices.