US initial jobless claims drop to lowest since 1973

The number of Americans filing for unemployment benefits dropped more than expected last week, according to data from the Labor Department.

US initial jobless claims were down 22,000 from the previous week’s level to 222,000, compared with expectations for a drop to 240,000.This marked the lowest level for initial claims since March 31, 1973 when it was 222,000.

Meanwhile, the previous week’s level was revised up by 1,000 to 244,000.

The four-week moving average came in at 248,250, down 9,500 from the previous week’s average, which was revised up by 250 to 257,750. The four-week average is considered more reliable as it smooths out sharp fluctuations in the more volatile weekly figures, giving a more accurate picture of the health of the labour market.

The Labor Department said claims taking procedures continued to be severely disrupted in Puerto Rico and the Virgin Islands as a result of power outages and infrastructure damage caused by Hurricanes Irma and Maria.

Pantheon Macroecononics said that the last time claims were this low in 1973, payroll employment was half today's level.

"Adjusted for the rising population, this is a record low. It probably won't last - the trend before the hurricanes was steady, in the high 230s - but it does serve as a very forceful reminder that the labour market is in very good shape. Once the hurricane
distortions fade, we expect the trend in payroll growth to revert to a sustained 200K-plus, which will push the unemployment rate very close to 3.5% by this time next year. The last time unemployment was that low, in 1969, core CPI inflation was 6%."