US job market upturn illusory warn analysts

Ben Southwood
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NEW JOBLESS claims dipped to a four-year low last week in the US, according to yesterday’s estimates from the Department of Labor.

Dropping 24,000 in the week ending 30 June, initial claims last week reached just 350,000, adjusted for seasonal trends.

But analysts warned the seasonal adjustment applied to the data disguised a jump of almost 70,000 in new claims – suggesting the labour market is weaker than the headline figure suggests.

“The drop is a meaningless blip,” argued Paul Ashworth at Capital Economics.

“Monthly seasonal adjustment is quite accurate, but adjusting weekly is very unreliable.”

Much of the discrepancy in the figures comes from a later holiday for US car firms, which close completely for two weeks – what is known in the UK as a “factory fortnight.”

“Although claims have dropped now, there is a good chance they’ll go up when firms build up inventories and workers get their holiday,” said Ashworth.

Meanwhile San Francisco Fed president John Williams announced the central bank is prepared to take more action to cut unemployment – perhaps including another “Operation Twist”.

“If further action is called for, the most effective tool would be additional purchases of longer-maturity securities, including agency mortgage-backed securities,” Williams said.

“We stand ready to do what is necessary to attain our goals of maximum employment and price stability.”