US initial claims dropped 23,000 the week ending May 18, 2013 after jumping 35,000 to an upwardly revised 363,000 (was 360,000) the previous week. The decline in the latest week left the level of claims below market expectations for a 345,000 reading.
The four-week moving average of initial claims, which better controls for weekly volatility, was little changed, dipping modestly to 339,500 from 340,000 the previous week. Continuing claims for the week ending May 11, 2013 declined by 112,000 to 2,912,000. This marked the first time the measure has been below the 3,000,000 mark since May 2008.
The drop in claims in the latest week, which also happened to coincide with the May payroll employment survey week, still did not retrace all of the jump from the previous week; however, the, albeit modest, dip in the four-week moving average left the measure well below its 362,000 level from a month ago and still showing relatively little effect from the sizeable government sequestration cuts that took effect in March. A drop in hours worked in the private sector in April despite a respectable 179,000 gain in private employment suggested that businesses may so far have opted to cut back on hours rather than lay off workers. As well, it remains possible that uncertainty about the fiscal outlook could cause business to delay hiring going forward; however, today’s report remained consistent with our expectation that underlying improvement in labour market conditions will allow for continued respectable job growth despite significant fiscal contraction.
RBC