Video: US weekly jobless claims drop

msnbc.com news services
updated 5/19/2011 10:46:01 AM ET 2011-05-19T14:46:01

Fewer people applied for unemployment benefits last week for the second straight week, suggesting that a slow recovery in the job market is continuing.

But the oervall economic recovery will be choppy this summer, according to a widely watched gauge of future activity.

The Labor Department said Thursday that applications for benefits dropped 29,000 last week to a seasonally adjusted 409,000. The four-week average, a less volatile measure, rose slightly to 439,000, the sixth straight increase.

Economists had forecast that 420,000 laid-off workers applied for unemployment benefits last week, according to a FactSet survey.

"Jobless claims are still at levels consistent with moderate job growth and little progress in bringing unemployment down," said Avery Shenfeld, chief economist at CIBC World Markets in Toronto.

The Conference Board, however, said its index of leading economic indicators dropped 0.3 percent in April, the first decline since June 2010.

The index has moved steeply higher in four of the past five months as the job market improved and the stock market rallied. Last month's spike in the number of people filing for unemployment assistance — which many economists think was temporary — and a troubled housing market are weighing on the indicators.

Conference Board economist Ken Goldstein says "economic growth will likely continue through the summer and fall, but the pace of economic activity may be choppy."

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"We're probably past the peak in regard to manufacturing activity, but we don't think manufacturing activity is stopping. We just think it is slowing a bit," said Tom Porcelli, a U.S. economist at RBC Capital Markets in New York.

Two weeks ago, the Labor department reported that applications surged to an eight-month high of 474,000. That was nearly 100,000 above February's three-year low of 375,000 — a level typically consistent with sustainable job growth. Weekly applications peaked during the recession at 659,000.

Major Market Indices

Labor Department analysts attributed much of the gains in the 4-week average over the past month to technical and seasonal factors. More New York school systems closed late last month for spring break than expected and a new extended benefits program in Oregon caused applications in both states to jump.

More temporary factors could be on the way. The tornadoes that devastated much of Alabama and parts of other states late last month, as well as recent flooding on the Mississippi, could cause applications to rise.

Still, job growth has been strong this year. Businesses have added a net total of more than 250,000 jobs per month, on average, in the past three months, the fastest hiring spree in five years. The unemployment rate has dropped nearly a full percentage point in the past five months, though it remains a very high 9 percent.

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New York Federal Reserve Bank President William Dudley told students in New Paltz, N.Y., on Thursday that unemployment still remains "unacceptably high" and most measures of underlying inflation trends remain below the Fed's comfort zone.

"The recovery remains moderate and we still have a considerable way to go," said Dudley, who is seen as one of the more dovish Fed officials.

Real estate continues to struggle too. Fewer Americans purchased previously occupied homes in April. But foreclosure sales declined while activity among first-time homebuyers increased.

The National Association of Realtors said sales of previously occupied homes fell 0.8 percent in April to a seasonally adjusted annual rate of 5.05 million units. That's far below the 6 million homes a year that economists say represents a healthy market.

In April, sales of homes at risk of foreclosure fell 3 percent to 37 percent of all purchases. Purchases made by first-time homebuyers rose 3 percent to 36 percent.

The Associated Press contributed to this report.

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