The number of Americans filing new claims for unemployment benefits last week fell back to the pre-superstorm Sandy range, suggesting a return to modest job growth after a storm-related set back.
Initial claims for state unemployment benefits dropped 25,000 to a seasonally adjusted 370,000 in the week ended December 1, the Labor Department said on Thursday. It was the third straight weekly decline.
Continue Reading Below
The drop brought them back to the 360,000 to 370,000 range they had been in before Sandy battered the East Coast in late October. Economists had forecast claims falling to just 380,000.
"This signals that the hurricane caused some temporary disruptions in the labor market, but the underlying strength in the labor market has been basically unchanged in recent months," said Daniel Silver, an economist at JPMorgan in New York.
The decline came too late to have any impact on a report on employment in November set for release on Friday. Economists estimate the monster storm could subtract between 25,000 and 75,000 jobs from November's nonfarm payrolls.
The closely watched report, which can set the tone for financial markets worldwide, is expected to show payrolls rose only 93,000 last month after advancing 171,000 job in October, according to a Reuters survey of economists. The unemployment rate is seen holding steady at 7.9 percent.
"There will likely be a profound, negative impact on November payroll creation shaving up to 50 percent of last month's gain," said Lindsey Piegza, an economist at FTN Financial in New York.
IN A HOLDING PATTERN
A separate report from consultants Challenger, Gray & Christmas showed planned layoffs at U.S. firms rose nearly 20 percent in November to their highest level in six months.
The bankruptcy of Twinkies maker Hostess Brands accounted for about a third of the jobs lost.
Employment growth has averaged a modest 170,000 per month over the past three months. Businesses have been fearful a sharp tightening of the government's budget could push the economy into recession and they have been cautious about aggressively spending on labor and capital.
A wave of deep government spending cuts and big tax increases could start to drain about $600 billion from the economy early next year unless the Obama administration and the U.S. Congress can agree on a less painful way to cut government deficits.
"Businesses are nervous about the fiscal cliff but they are not in a panic. They are in a holding pattern. They are not hiring or firing," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
"This is actually a reason for optimism. If we make it past the fiscal cliff, hiring might pick up."
First-time applications for state unemployment benefits are likely to be volatile in the weeks ahead as seasonal layoffs in sectors like construction start picking up. That trend could hold until early January. The government often has a difficult time smoothing the data to account for these seasonal patterns.
The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid dropped 100,000 to 3.21 million in the week ended November 24.
(Reporting By Lucia Mutikani; Editing by Neil Stempleman and Tim Ahmann)