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Applications for unemployment aid plunge to 42-year low

Applications for unemployment aid plunge to 42-year low

The number of Americans filing initial applications for unemployment benefits fell to a 42-year low last week in the latest sign the labor market is poised for further gains. First-time claims for the week ending July 18 dropped by 26,000 to 255,000, the lowest level since 1973, the Labor Department said Thursday. Economists surveyed by Bloomberg expected a dip of just 3,000.jobs-in-america

The four-week average, which smooths out volatility, declined by 4,000 to 282,500. Last week’s decline was likely accentuated by two big summer auto plant shutdowns. Yet the total was a record low after adjusting for population gains since 1973. Initial jobless claims are a reliable gauge of layoffs. And with the unemployment rate at a seven-year low of 5.3% and a growing number of workers feeling confident enough to switch jobs, many employers are holding on to staffers.

“There is certainly no sign of the labor market losing momentum,” says Jim O’Sullivan, chief U.S. economist for High Frequency Economics. The economy has gained nearly 3 million jobs in the past year. With that many more people earning paychecks, economists forecast that spending should pick up and help fuel growth for the rest of this year.

Even so, there are some signs of ongoing weakness in the job market. The unemployment rate fell in June mostly because many of the unemployed stopped looking for work, rather than found jobs. The proportion of Americans working or looking for work fell to a 38-year low. And average hourly pay was unchanged last month from May. Pay has risen at roughly a 2 percent annual pace since the recession ended in 2009, below the 3.5 percent typical in a healthy economy.