The number of Americans filing new applications for unemployment benefits last week dropped to its lowest level in more than 41-1/2 years, suggesting the labor market maintained a sturdy pace of job growth in July. Other data on Thursday also offered an upbeat assessment of the economy. A gauge of future economic activity increased solidly in June and another measure suggested growth picked up slightly last month.
The bullish jobs picture, together with a firming housing market brings the Federal Reserve a step closer to hike interest rates this year. “This should reassure policymakers that their objective of maximum employment is coming closer into view,” said John Ryding, chief economist at RDQ Economics in New York.Initial claims for state unemployment benefits fell 26,000 to a seasonally adjusted 255,000 for the week ended July 18, the lowest level since November 1973, the Labor Department said.
However, last week’s drop likely exaggerates the strength of the labor market as claims are volatile during summer when automakers usually shut assembly plants for annual retooling. Some firms keep production lines running, which can throw off a model the government uses to smooth the data for seasonal variations. A Labor Department analyst, however, said there were no special factors influencing the data.