US unemployment benefit applications likely fell last week after rise in previous 2 weeks

MarketsAssociated Press

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: The expectation is that the number of people filing for benefits dipped to 277,000 last week, a drop of 4,000 from the previous week, according to a survey of economists by data firm FactSet.

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JOB MARKET: The labor market has been posting solid employment gains although it has not fully recovered from the two-year recession that ended in 2009.

The government reported last week that the unemployment rate fell to a seven-year low of 5.3 percent in June while employers added 223,000 jobs.

It was the lowest jobless rate since April 2008, when it was 5 percent. It eventually soared to 10 percent in late 2009 as millions of people were tossed out of work by the worst economic downturn since the Great Depression of the 1930s.

While unemployment has dropped, other labor market indicators have not performed as well, a fact that Fed Chair Janet Yellen often cites in explaining why the Fed has not yet begun raising interest rates. In June, wage growth was stalled, with hourly wages up just 2 percent over the past 12 months.

And the unemployment rate fell for the wrong reason, because many people out of work apparently got discouraged and gave up looking for a job. The government doesn't count people as unemployed unless they are actively seeking work.

With the number leaving the labor force up, the proportion of Americans working or looking for work slipped to a 38-year low.

The Fed released minutes of its June meeting on Wednesday.

They revealed that the central bank officials were seeing signs that the U.S. economy was recovering from its winter slump but at the same time officials were concerned about lingering weakness at home and the threat of troubles overseas including weaker growth in China and a stalemate in the Greek debt negotiations.

Given that those problems have gotten worse in recent weeks, many analysts believe that the Fed's first rate hike will not occur in September, as they had been forecasting, but will slip until December. Financial markets hope to learn more about the Fed's plans when Yellen speaks on the economic outlook on Friday in a speech in Cleveland.