- Jennifer Lee, an economist at BMO Capital Markets
The number of Americans filling new applications for jobless benefits in the week ended July 18 to the lowest level in 42 years, indicating the US labour market kept a solid pace of employment growth in July. The solid jobs data along with an improving housing market brings the Fed a step closer to hiking the benchmark interest rate this year. Initial claims for unemployment benefits dropped 26,000 to a seasonally adjusted 255,000 last week, the lowest level since November 1973, according to the Labor Department. Claims for the previous week, meanwhile, remained unrevised. Nevertheless, the decline likely exaggerates the strength of the labour market as claims are volatile during summer when automakers usually shut assembly plants for annual retooling. The four-week moving average of claims, a better measure of labour market trends as it excludes week-to-week volatility, dropped 4,000 to 278,500 last week. The four-week moving average of claims has been below the key 300,000 mark, which is associated with solid job gains, for 17 consecutive weeks, an unusually long streak. Though the four-week average rose 1,500 between the June and July, payroll growth likely remained above the 200,000 threshold this month. Payrolls increased 223,000 in June after soaring 254,000 in May. Job growth has exceeded 200,000 in 14 of the last 16 months and at 5.3%, the jobless rate is close to the 5.0%-5.2% range that the Fed considers consistent with full employment.
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