The number of United States citizens filing applications for unemployment benefits fell to more than a 49-year low last week, but the drop likely overstates the health of the labour market as claims for several states including California were estimated.
Still, labor market conditions remain strong, which for now should help to temper fears of a sharp slowdown in economic growth. Other data on Thursday showed a gauge of future U.S. economic activity fell in December.
The economy is facing several headwinds, including a bitter U.S. trade dispute with China and a month-long partial shutdown of the federal government, which are hurting consumer and business confidence. Higher interest rates, fading fiscal stimulus and cooling global economies are also seen crimping domestic growth.
Initial claims for state unemployment benefits dropped 13,000 to a seasonally adjusted 199,000 for the week ended Jan. 19, the lowest level since mid-November in 1969 when 197,000 applications were recorded, the Labor Department said.
The Labor Department said claims for California, Kansas, North Dakota, Virginia, West Virginia and Hawaii were estimated last week because of Monday’s Martin Luther King holiday.
The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 5,500 to 215,000 last week.
About one-quarter of federal agencies have been shuttered since Dec. 22, impacting 800,000 government employees, with many working without pay and others furloughed. All workers will be paid retroactively when the shutdown ends.
But economists expect the longest shutdown in history will push the unemployment rate above 4% in January as the furloughed workers would be considered unemployed.
The jobless rate rose two-tenths of a percentage point to 3.9% in December as strong labor market conditions attracted some unemployed people back into the labor force.
Thursday’s claims report showed the number of people receiving benefits after an initial week of aid decreased 24,000 to 1.71 million for the week ended Jan. 12. The so-called continuing claims data covered the week of the household survey from which January’s unemployment rate will be calculated.