Wrap-Up: US Jobless Claims Decline, Productivity Increases – Reuters

U.S. Jobless Claims Decrease for Third Week; Productivity Surges in Q1

Fewer workers in the U.S. applied for jobless benefits for a third consecutive week, and productivity saw an unexpected rise in the first quarter, signaling a potential easing of the recession’s grip, according to recent data.

For the week ending May 30, initial claims for state unemployment insurance dropped by 4,000, bringing the total to 621,000, as reported by the Labor Department. This week coincided with the Memorial Day holiday, which may have influenced the numbers.

Additionally, there was positive news regarding those remaining on unemployment benefits. The number of individuals continuing to claim assistance decreased for the first time since early January.

In a separate report, the Labor Department revealed that non-farm productivity experienced a notable increase in Q1, exceeding initial projections.

"It’s encouraging that we seem to have reached a turning point in unemployment claims, suggesting we might be nearing the end of the recession if this trend continues. Other indicators support this optimism as well," said Michael Darda, chief economist at MKM Partners in Connecticut.

The stock market reacted positively to the reports, with U.S. stock indexes rising, while Treasury debt prices saw a slight decline.

Recent data, including home sales, have fueled optimism that the most challenging period of the prolonged recession may be over. Analysts are closely monitoring new unemployment claims for indications of stability in the labor market, which has been heavily affected by economic downturns.

Experts believe that new applications for unemployment benefits need to fall below 600,000. Companies have been making significant cuts to their workforce to manage costs amid decreasing demand.

Upcoming non-farm payroll data for May is expected to reveal that employers cut around 520,000 jobs during the month, following a reduction of 539,000 in April.

For the week ending May 23—the most recent data available—continuing claims dropped by 15,000 to 6.74 million. This marks the first decrease in continued claims since January and the first time in 17 weeks that they did not reach a new record. The insured unemployment rate has held steady at 5.0 percent for three consecutive weeks.

However, the four-week moving average for new claims, which provides a clearer picture of trends by smoothing out weekly fluctuations, rose by 4,000 to 631,250 for the week ending May 30.

Job cuts by companies and reduced working hours have contributed to increased productivity during the first quarter. A separate report indicated that non-farm productivity rose at a revised annual rate of 1.6 percent, representing the fastest growth since Q3 2008, significantly surpassing previous estimates of a 0.8 percent increase and the prior quarter’s 0.6 percent decline.

According to analysts surveyed, productivity—measuring output per worker—was expected to rise by 1.2 percent.

In the first quarter, hours worked plummeted at an annual rate of 9 percent, the steepest decline observed since Q1 1975. Specifically, hours worked in manufacturing fell at an annual rate of 19.5 percent, marking the largest quarter-over-quarter drop since records began in 1987.

Unit labor costs, which are closely monitored by the Federal Reserve as indicators of inflation and profit pressures, rose by 3.0 percent in the first quarter, slightly above analysts’ expectations for a 2.9 percent increase.