A gauge of the trend in layoffs of American workers fell last week to its lowest since before the 2007-09 recession, a hopeful sign for the U.S. economy.
The four-week average of new claims for state jobless benefits dropped to 335,500, the Labor Department said on Thursday. The reading has not been that low since November 2007, just before the United States fell into a calamitous recession.
Now it appears that a long cycle of aggressive layoffs, which had fueled a surge in unemployment and helped shape two presidential elections, is over.
Still, employers have appeared reticent to hire, and Thursday's data still pointed to only modest economic growth. Last week, initial jobless claims edged 5,000 higher to 333,000, a little less than expected.
"The overall economy and the labor market are improving at a moderate pace," said Lindsey Piegza, chief economist at brokerage Sterne Agee & Leach in Chicago.
The pull-back in layoffs since 2009 has helped bring about a substantial fall in the jobless rate, and the trend in jobless claims could make the Federal Reserve more comfortable in unwinding the nation's last giant economic stimulus program.
Many economists expect the U.S. central bank to begin reducing its massive bond-buying stimulus program as soon as next month. The Fed currently buys $85 billion a month in bonds to push borrowing costs lower and help boost economic recovery.
While layoffs are roughly half their level in early 2009, the recovery in job creation has been more lackluster.
Employers added just 162,000 workers to payrolls in July. Economic growth has also trended lower in recent months, with national output growing at a mere 1.4 percent annual rate in the first half of the year, down from 2.5 percent in the same period of 2012.
"The potential for job creation to meaningfully accelerate is limited," said Jim Baird, an investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.
Wall Street analysts polled by Reuters had expected first-time applications to rise to 336,000 last week, and investors did not appear to take any cues from the claims data.
U.S. stock prices rose, while yields on U.S. government debt fell ahead of a $16 billion bond auction.
New jobless claims were volatile in July due to regular summer auto plant shutdowns, which make it hard for the government to adjust the data for seasonal swings.
But that volatility is now past, and Labor Department analysts said there was nothing unusual in the data and that no states had provided estimates.
The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid rose 67,000 to 3.018 million in the week ended July 27.
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