Applications for US unemployment aid likely dropped to levels consistent with solid hiring

Markets Associated Press

The U.S. Labor Department reports on the number of people who applied for unemployment benefits last week. The report will be released Thursday at 8:30 a.m. Eastern.

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MODEST FALL: Economists forecast that weekly applications dropped 7,000 to a seasonally adjusted 300,000, according to a survey by the data firm FactSet.

That would be the second straight drop after applications spiked in early January, reaching a seven-month high of 317,000 two weeks ago. Much of that increase, however, reflected holiday volatility, as retailers, restaurants and other firms laid off temporary employees hired over the winter holidays. The government tries to adjust for such seasonal patterns, but isn't always able to do so perfectly.

The weekly applications are a proxy for layoffs, and have been near or below 300,000 since September. That suggests companies are confident enough in the economy to hold onto their staffs.

APPLICATIONS STILL LOW: Applications have trended up since December but are still at historically low levels that are consistent with healthy job gains.

The four-week average, a less volatile measure, rose to 306,500 in last week's report. That is up about 16,500 from a month ago, but still 8.5 percent lower than a year earlier.

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It is also nearly the same as the average weekly applications in 2014 of 308,000, according to High Frequency Economics.

Applications at that level were consistent with job gains of 246,000 a month last year, the fastest pace of hiring since 1999. That suggests hiring should remain healthy with applications at their current level.

Last year's robust hiring means that nearly 3 million more Americans are earning paychecks than a year ago. That should boost consumer spending and help power faster economic growth this year.

Still, wage growth has lagged hiring. Average wages increased only 1.7 percent in 2014. That's down from 1.9 percent in 2013 and much lower than the 3.5 percent to 4 percent that is consistent with a healthy economy.