US unemployment benefit applications plunge to 15-year low

WASHINGTON (AP) – The number of people seeking unemployment aid plunged last week to the lowest level in almost 15 years, a sign hiring will likely remain healthy.

Weekly applications dropped 43,000 to a seasonally adjusted 265,000, the Labor Department said Thursday. That is the lowest level since April 2000. It is also the biggest decline in two years. The four-week average, a less volatile measure, fell 8,250 to 298,500.

The latest drop may have been exaggerated by the federal holiday, which likely slowed the processing of some claims.

Still, applications are a proxy for layoffs, so the sharp decline means companies are probably cutting fewer jobs. The four-week average has fallen 11 percent in the past year. At the same time, hiring has picked up. Employers added almost 3 million jobs last year, the most since 1999. Strong economic growth has encouraged companies to add more workers.

“This is good news,” said Jennifer Lee, an economist at BMO Capital Markets. “But it was also a holiday-shortened week so there could be a special factor perhaps artificially deflating the number. A partial reversal next week … should still show an improving labor market.”

Last week included the Martin Luther King Jr. holiday, when state unemployment offices were closed. That could have delayed the processing of some applications, a Labor Department spokesman said. The unemployed can apply for benefits online, though they are typically less likely to do so on a holiday. That suggests applications could rise next week.

Some of the drop also reflects the end of seasonal layoffs of temporary employees hired by retailers and restaurants for the winter holidays. Those layoffs caused a spike in applications in early January. They reached a seven-month high of 317,000 three weeks ago. The government tries to adjust for such seasonal patterns but isn’t always able to do so perfectly.

Applications have been near or below 300,000 since September. That suggests companies are confident enough in the economy to hold onto their staffs.

Last year’s robust hiring means that more Americans are earning paychecks than a year ago. That should boost consumer spending and help power faster economic growth this year. Most economists forecast growth will top 3 percent in 2015 for the first time in a decade.

Yet wage growth has lagged hiring. Average wages increased only 1.7 percent in 2014. That’s down from 1.9 percent in 2013 and much lower than the 3.5 percent to 4 percent that is consistent with a healthy economy.