Unemployment Benefits Applications Drop, Signal Economic Upturn

Initial claims for state unemployment benefits dropped by 9,000 to a seasonally adjusted 346,000, the Labor Department said on Thursday. Claims for the previous week were revised to show 1,000 more applications than previously reported.

Economists polled by Reuters were expecting initial claims applications to come in at 345,000 last week.

The four-week moving average for new claims fell 2,750 to 345,750.

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A Labor Department analyst said no states had been estimated and there were no special factors in the state data.

Some 175,000 new jobs were created by employers last month. Job gains have averaged 172,000 over the last 12 months.

The number of unemployment applications is used to figure layoffs and employment rates. The unemployment rate stands at 7.6 percent, up a tenth of a percentage from last month but down 8.2 percent from a year earlier.

The government revised its estimates of the country’s economic growth from a forecast 2.4 percent to just 1.8 percent. The estimate was lowered because of less consumer spending, Yahoo! Finance reported.

Consumer spending rose 0.3 percent last month, but had fallen 0.3 percent in April. A positive Commerce Department statistic shows that incomes rose 0.5 percent, the most in three months.

Federal Reserve Chairman Ben Bernanke’s remarks roiled financial markets last week when he said the Fed would slow its purchases of bonds if the economy continued to recover. The Fed said that downside risks to the outlook for the jobs market had decreased since the fall, and was considering reducing the $85 billion in bonds it has been purchasing each month under an easing program designed to keep interest rates low and boost the economy.

But the Fed may need to wait for growth to be less anemic before taking action. Some economists think a lightening up of the Fed’s easing tactics will not take place until this fall, according to The Associated Press.

Other recent economic reports also show encouraging signs.

Factory orders rose one percent in April.

Existing-home sales were up 4.2 percent in May compared with April, and are 12.9 percent above 2012 sales, the National Association of Realtors reported.

Consumer confidence has risen for three months in a row and stands at a five-year high.

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