U.S. Unemployment Continues to Drop, but Job Growth Is Sluggish

According to a Labor Department report released Thursday, only 268,000 people requested unemployment benefits, marking a 9-month low and the second-lowest unemployment rate in at least a year.

Officials are optimistic that the new figures herald a further strengthening of the labor market and further expansion of the U.S. economy. The official data have even surprised economists that had forecast 286,000 applicants for unemployment benefits this month.

According to the new figures, employers were less eager to dismiss their workers since they are waiting for a strong rebound in sales. The current status of U.S. unemployment is consistent with household spending and the Federal Reserve’s view on the evolution of the job market for this year.

Tom Simons, an analyst from New York-based Jefferies, recently said that everything was still good on the labor market front.

“One element of the economy that isn’t reflecting the weakness seen elsewhere is the job market. It indicates consumers will have more purchasing power and thus should be able to increase consumption,”

Mr. Simons argued.

The previous week, the Labor Department reported 282,000 unemployment claims, so nearly 50 economists rushed to range their predictions for this week from 270,000 to 310,000. Yet, Thursday’s report was adjusted for seasonal factors.

Officials also said that no state reported unemployment claims last week, so the situation may soon get even better. But Labor Department employees said that the four-week average numbers of 285,000 jobless claims were more realistic than the weekly numbers.

Unemployment claims dropping below 300,000 is a healthy sign of an improving economy and an expanding job market, economists claim. On the other hand, other reports point out that the U.S. economic growth was sluggish at the start of this year as consumer spending stalled amid harsh winter conditions that lasted until February.

Bad weather may have kept consumers away from malls and car dealerships, analysts believe. Additionally, a Wednesday report reveals that manufacturing faced its sharpest slow-down in almost two years, as a stronger U.S. currency and the delays in shipments led to weaker exports.

According to the Commerce Department’s data, the U.S. trade deficit hit its lowest level since 2010 due to labor disputes at West Coast ports, delays, and a strong dollar. Imports were at their lowest since April 2011.

Additionally, official data shows a sluggish job growth for various reasons. Low consumer spending doesn’t encourage companies to hire too many too soon. For instance, according to an ADP Research Institute’s report, this month U.S. companies added only 189,000 new employees, which is the smallest gain in more than 14 months.

Moreover, job growth may be also affected by the plunge in oil prices since energy industry shut down many of its plants due to over-production and over-supply.

Texas, which is the largest oil producer of the nation, will see a more than 2 percent drop in job growth this year, experts claim.According to a Federal Reserve Bank of Dallas report, about 140,000 Texans may lose their jobs. If that really happens, Texas will start to lag behind the rest of the states for the first time in more than a decade.

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