Unemployment benefit applications drop sharply
WASHINGTON — The number of people applying for unemployment benefits fell to its lowest point in nearly two and a half years, a sign that the job market is slowly improving.
Applications dropped by 34,000 to 388,000, the fewest since July 2008, the Labor Department said today. The number of applications has either fallen or remained unchanged in five of the past six weeks.
Fewer than 425,000 people seeking unemployment benefits signals modest job growth. But economists say applications need to fall consistently to 375,000 or below to bring down the unemployment rate. Applications for unemployment benefits peaked during the recession at 651,000 in March 2009.
The latest report, which covers the week with the Christmas holiday, is considered by some economists to be less reliable than most. One reason is that many state offices close for at least one day. Other seasonal factors make the report more volatile.
Still, a department analyst said there were no unusual factors affecting the report and that it considers the impact of the holiday.
Economists said what matters most is the downward trend.
“If we can continue this improving trend, we’ll likely see stronger job growth in 2011,” said Benjamin Reitzes, an economist at BMO Capital Markets.
Separately, the number of people who signed contracts to buy homes rose in November, the fourth increase since contract signings hit a low point in June.
The National Association of Realtors said its index of sales agreements for previously occupied homes increased 3.5 percent last month from October. Still, this year’s pace of completed home sales — which the Realtors group measures in a separate report — is shaping up to be the slowest in 13 years.
Historically low mortgage rates have done little to boost the struggling housing market. This week the average rate on a 30-year fixed mortgage rose to its highest level in seven months. It was up to 4.86 percent from 4.81 percent in the previous week, mortgage giant Freddie Mac said. It had been 4.17 percent last month, a 40-year low.
Applications are the closest thing to a real-time snapshot of the job market. They reflect the level of layoffs but can also indicate whether companies are willing to add workers.
The four-week average, a less-volatile measure, dropped by 12,500 to 414,000 in the week ending Dec. 25. That’s the lowest level since late July 2008.
For most of the year applications hovered around 450,000 before dropping below that number in November. The four-week average has fallen by more than 40,000 in the past two months — a sign that hiring could accelerate in the coming months.
Employers added a net total of only 39,000 jobs in November, the Labor Department said earlier this month, and the unemployment rose to 9.8 percent.
Most economists expect the December jobs report will show larger job gains. The report comes out on Jan. 7.
Reitzes said that employers likely added 150,000 net new jobs this month. He also projects the unemployment rate will tick down to 9.7 percent. The monthly total of new jobs could increase next year if claims continue dropping steadily, he said.
The total number of people receiving unemployment benefits rose in the week ending Dec. 18 to 4.13 million.
That doesn’t include millions of unemployed workers receiving extended benefits under an emergency program set up during the recession. About 4.5 million people are receiving extended benefits for up to 99 weeks. All told, nearly 8.9 million people obtained unemployment benefits in the week ending Dec. 11, the latest data available.
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