WASHINGTON — The number of U.S. workers filing new claims for state unemployment insurance fell last week, the third drop in a row, suggesting that the flurry of job cuts this year may be easing.
The Labor Department reported Thursday that new applications for jobless benefits for the workweek ending June 23 declined by a seasonally adjusted 16,000 claims to 388,000, the lowest point since early May.
Many economists were predicting that claims would rise.
The week before, new claims plunged by 31,000, after dropping by 2,000 in the prior week.
“This is certainly a bright spot for a labor market that has been weak,” said Richard Yamarone, economist with Argus Research Corp. “The job market may be stabilizing.”
On Wall Street, stocks soared as investors cheered a federal appeals court’s reversal of the breakup of software giant Microsoft and the Fed’s interest-rate cut. The Dow Jones industrial average closed up 131.37 at 10,566.21.
The Federal Reserve on Wednesday cut interest rates for the sixth time this year to boost the sagging economy. The latest reduction was a conservative one-quarter percentage point; the other five were one-half point each.
Investors were unmoved by the smaller cut Wednesday but they decided on Thursday that it was a good enough reason to rally.
Meanwhile, the more stable four-week moving average of jobless claims, which smoothes out week-to-week fluctuations, also fell last week to 416,000, the lowest level since the beginning of the month.
Economist Clifford Waldman of Waldman Associates viewed the decline in jobless claims as a positive development, but cautioned: “It’s way too premature to call this a turning point in the labor market, especially because of a rash of weak earnings reports coming from the corporate sector.”
The economic slowdown has been hard on companies struggling with slumping demand.
To cope, they have sharply cut production and laid off workers. In May, the unemployment rate edged down to 4.4 percent, but businesses eliminated 19,000 jobs. Nortel Networks and International Paper are among companies that have recently announced layoffs, and economists expect the jobless rate will rise in the months ahead.
In addition, higher energy costs have squeezed corporate profits.
Still, the jobless claims report comes during a week that has generated other good economic news, offering hope that the economy, which has been mired in a slowdown for a year, may be showing some signs of improving.
On Tuesday three reports showed that consumer confidence in June rose to its highest level of the year; demand for big-ticket items jumped in May; and new-home sales rose solidly.
Thursday’s report also showed that for the workweek ending June 16, 42 states and territories reported a decrease in claims and 11 reported increases. The information lags a week behind the national figures and is not seasonally adjusted.
North Carolina reported the biggest drop in claims, down by 12,427 because of fewer layoffs in the food, electronics, trade, textile, apparel and furniture industries. Illinois saw claims go down by 3,175 due to fewer layoffs in the construction, service and manufacturing businesses.
Tennessee had a 2,675 decline in claims because of fewer layoffs in a variety of industries, including transportation, textile, apparel and lumber.
California reported the biggest jump in new claims, up by 1,262 because of layoffs in the electronics and agriculture industries.
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