WASHINGTON - The number of Americans filing initial unemployment claims unexpectedly fell last week, signaling that the U.S. job market may be strengthening heading into the new year.
Initial jobless claims dropped 5,000 to 326,000 in the week that ended Dec. 25, the Labor Department said yesterday. An index of Chicago-area business fell for a second month, a sign of slower growth in manufacturing that prompted investors to push up U.S. Treasury note prices.
The U.S. economy created more than 2 million jobs in 2004, the most since 1999. The rebound in hiring is one reason consumers have kept spending, putting economic growth on the strongest pace in five years.
"There should be an improvement in employment as we move into 2005," said Glenn Haberbush, an economist at Mizuho Securities USA Inc. in Hoboken, N.J. "As long as the labor market continues to move along, spending will get even more of a lift."
The National Association of Purchasing Management-Chicago said yesterday that its Business Barometer declined to 61.2 this month, from 65.2 in November. Readings higher than 50 indicate growth. Even with the decline, the Chicago index marked its 20th-straight month of expansion. It has dropped since reaching a 16-year high of 68.5 in October.
"While the December index is lower than those for October and November, it is still quite elevated," said Joshua Shapiro, chief U.S. economist at MFR Inc. in New York. Measures of orders and production are "evidence that the manufacturing sector is still enjoying solid upward momentum."
Jobless claims have averaged 343,000 a week this year compared with 402,000 in 2003. Economists had predicted claims would rise to 335,000, based on the median estimate, from the 333,000 initially reported for the week earlier.
The four-week moving average of claims, a less-volatile indicator, fell by 6,000 to 333,500, the Labor Department said. The number of people continuing to collect state jobless benefits rose to 2.755 million in the week that ended Dec. 18 from 2.751 million a week earlier.
The insured employment rate, which tends to track the unemployment rate, held at 2.2 percent in the week that ended Dec. 18. The Labor Department also said 32 states and territories reported a decrease in new claims, and 21 reported an increase. These data are reported with a one-week lag.
Claims figures in the last two months of the year tend to be volatile because the government has difficulty adjusting for the timing of the Thanksgiving, Christmas and New Year's holidays. That gives economists less confidence in forecasting the readings for the next few weeks.
A Labor Department spokesman said the seasonal adjustments accurately captured the change in claims last week.
The outlook for hiring in the first three months of 2005 has improved from the same period last year, according to survey by Manpower Inc., the world's No. 2 supplier of temporary staff by revenue. Twenty-four percent of the 16,000 employers polled intend to increase their staffs from January through March, compared with 20 percent in the first quarter of 2004, the report, issued this month, showed.
Firms are hiring as the economy improves. The world's largest economy is projected to grow 4.4 percent this year, the most since 1999.