The number of Americans filing first-time claims for unemployment insurance payments fell more than forecast last week to the lowest level in five years, pointing to further improvement in the labor market.
Applications for jobless benefits decreased by 37,000, to 335,000, in the week ended Jan. 12, the lowest level since the period ended Jan. 19, 2008, Labor Department figures showed Thursday. Economists predicted 369,000 claims, according to the median estimate in a Bloomberg survey.
A spokesman for the agency said the drop also may reflect the difficulty the government has in adjusting the data after the holidays when seasonal workers are let go.
“Our weekly numbers bounce around quite a bit,” the Labor Department official said as the figures were released. In the first couple weeks of January, unadjusted claims typically rise to the highest level of the year. The increase this week was smaller than the agency anticipated in adjusting the data.
“This tends to be a short-term distortion,” he said, noting that similar patterns occurred in January 2007 and 2008.
The four-week moving average of claims, a less-volatile measure, dropped to 359,250 from 366,000.
Fewer claims indicate businesses have grown comfortable with their current headcounts, a necessary development before hiring starts to pick up. At the same time, higher payroll taxes that shrink paychecks may prompt companies to hold the line on expanding headcount should Americans cut back on discretionary spending.
“The labor market is certainly getting better,” said Brian Jones, senior U.S. economist at Societe Generale in New York, who projected 345,000 claims. Even with the seasonal adjustment issues, “this is still a good report. Chances are claims remain at a fairly low level.”
Another report Thursday showed housing starts climbed 12.1 percent in December, to a 954,000 annual rate, capping the best year for the industry since 2008. For all of 2012, builders began work on 780,000 homes, up from 608,800 a year earlier, Commerce Department figures showed.
The number of people continuing to collect jobless benefits rose by 87,000, to 3.21 million, in the week ended Jan. 5. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments increased by about 68,000, to 2.06 million, in the week ended Dec. 29.
The unemployment rate among people eligible for benefits rose to 2.5 percent in the week ended Jan. 5 from 2.4 percent. Twenty-nine states and territories reported an increase in claims, while 24 reported a decrease.
Initial jobless claims reflect weekly firings and tend to fall as job growth, measured by the monthly non-farm payrolls report, accelerates.
Job creation held steady in December, with the 155,000 workers added to payrolls in line with the year’s average monthly growth rate of 153,000 jobs, Labor Department data show. That progress brought unemployment to 7.8 percent at the end of 2013, down from 8.3 percent at the start of the year.
A hurdle for the labor market may come from a higher payroll tax that damps consumers’ spending power. As part of its budget agreement on Jan. 1, Congress agreed to let the tax, used to pay for Social Security benefits, return to its 2010 level of 6.2 percent from 4.2 percent. That reduces the paycheck by about $83 a month for someone who earns $50,000.
Contributing to the ranks of the unemployed, American Express Co. said Jan. 11 it will eliminate 5,400 jobs this year. Morgan Stanley, the sixth-largest U.S. bank by assets, plans to eliminate about 1,600 jobs from its investment bank and support staff in upcoming weeks, about half of which are located in the U.S.