Applications for US unemployment benefits likely fell last week, economists forecast

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

APPLICATIONS DOWN: Economists forecast that the number of people seeking unemployment aid fell to a low 278,500 last week, down from 281,000 the previous week, according to a survey by data firm FactSet.

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Applications have been below 300,000, a historically low level, since March. They are a proxy for layoffs, so the low readings indicate that businesses are confident enough in the economic outlook to hold onto their workers.

SOLID JOB MARKET: With layoffs low, employers are also hiring more to meet greater demand for their goods and services. The economy added 223,000 jobs in June, and the unemployment rate fell to a seven-year low of 5.3 percent.

The economy has gained nearly 3 million jobs in the past year. With that many more people earning paychecks, spending should pick up a bit and help fuel growth for the rest of this year.

Still, there are signs of lingering weaknesses in the job market.

The unemployment rate fell mostly because many of the unemployed stopped looking for work, rather than found jobs. The proportion of Americans working or looking for work fell to a 38-year low.

And average hourly pay was unchanged in June from the previous month. Pay has risen at roughly a 2 percent annual pace since the recession ended in 2009, below the 3.5 percent typical in a healthy economy.

That sluggish wage growth is likely holding back spending from increasing as much as the healthy job growth would suggest. Sales at retailers and restaurants fell last month, the government said earlier this month, a sign Americans are still reluctant to spend freely.

Yet home sales have picked up and Americans are buying more cars. Sales of existing homes jumped in June to an eight-year high.

Analysts expect the economy will expand at about a 2.5 percent annual rate in the second quarter, after contracting 0.2 percent in the first three months of the year.