August 5, 2004 -- The number of U.S. workers filing for unemployment benefits fell last week, a piece of good news just before Friday's release of the employment situation report.
The Department of Labor reported that new applications for jobless benefits dropped by 11,000 to 336,000 for the week ended July 31, the lowest level since the beginning of the month. Economists had forecasted claims to fall to about 340,000.
New claims fluctuated throughout July due largely to seasonal auto plant closings for retooling. The four-week moving average, which is monitored closely because it smooths out much of the weekly volatility, actually rose to 343,500 in the last week of July, up from 336,750 the prior week. The overall trend of layoffs, however, is on the decline. Weekly claims were nearly 400,000 one year ago.
The strong report raises expectations for the latest employment numbers to be released on Friday. The economy stumbled in June, adding a very disappointing 112,000 jobs. Various polls show that economists expect new jobs to rise between 230,000 and 245,000 in July.
Though economic data for June was disappointing, recent data suggests that the economy is still on track. Factory orders increased 0.7 percent in June, after rising 0.4 percent in May. A report from the Institute for Supply Management showed that manufacturing picked up for the 14th consecutive month in July.
However, even when economic data has been strong, businesses have still been reluctant to add jobs on a consistent basis.
In his testimony before Congress last month, Federal Reserve chairman Alan Greenspan noted, "the proportion of temporary hires relative to total employment continues to rise, underscoring that business caution remains a feature of the economic landscape."