Resilience in the US jobs market

Other data suggested the federal austerity drive was combining with weak overseas demand to hold US factory activity in May to its weakest rate of growth in seven months.

Initial claims for state unemployment benefits dropped more than expected last week, falling 23,000 to 340,000, the Labour Department said.

The drop unwound most of the previous week’s jump, suggesting employers were not laying off workers in response to tighter fiscal policy, particularly the $85bn in across-the-board government spending cuts that have affected factory activity.

Last week’s claims data covered the survey period for the government’s report on non-farm payrolls for May. Claims dropped 15,000 between the April and May survey periods, suggesting steady gains in employment this month. Employers added 165,000 jobs to their payrolls in April.

“The recently lower initial claims readings have continued to suggest improvement on the layoff side of the labour market equation and should prove marginally positive for the May non-farm payroll report,” said Gennadiy Goldberg, US strategist at TD Securities in New York.

“The four-week moving average for new claims, which irons out week-to-week volatility, slipped 500 to 339,500. The labour market is being closely watched by the Fed as debate heats up over the future of its expansive monetary stimulus. Economic activity appears to have cooled early in the second quarter on back of tighter fiscal policy, but the slowdown could prove to be temporary.”