-Ian Shepherdson, chief economist at Pantheon Macroeconomics
The number of people applying for unemployment benefits rose more than expected in the week ended 4 July. However, the increase was likely due to temporary auto plant shutdowns rather than underlying weakness in the labour market. US initial jobless claims rose by 15,000 to 297,000 last week, according to the Labor Department, hitting the highest level since 327,000 applications were filed in the last week of February. Even with the recent rises, benefit applications, which are a proxy for layoffs, remain at low levels indicating a strengthening labour market that has enjoyed solid employment gains. The four-week moving average for claims, which smooths out the week-to-week volatility, climbed to 279,500, up slightly from 275,000 a week earlier. It was the highest level for the four-week average since early May. At the same time continued claims rose 69,000 to 2.334 million in the week ended June 27, the Labor Department added.
The government reported last week that the unemployment rate fell to a seven-year low of 5.3% in June, while employers added 223,000 jobs. It was the lowest jobless rate since April 2008, when it stood at 5.0%. Even though unemployment has declined, other labour market measures have not performed as well, a fact that Fed Chair Janet Yellen often refers to when explaining why the Fed has not yet started raising interest rates.
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