The Department of Labor seasonally adjusted data for the week ending June 16 show 2,000 fewer workers filed initial jobless claims. The figure declined to 387,000 compared to last week’s revised figure — adjusted higher from 386,000 to 389,000. The 45 economists surveyed by Bloomberg News predicted a median jobless claims figure of 383,000. Their estimates, ranging from 371,000 to 390,000, suggest a stagnant employment outlook for the near term.
The four-week moving average rose to 386, 250, up 3,500 from the revised average of 382, 750 recorded the prior week. The four-week moving average, which reached it highest point since December 3, 2011, provides a more reliable reading of the trend of jobless claims data.
Figures also show the seasonally adjusted advance insured unemployment rate remains stable at 2.6 percent for the week ending June 9, the same rate recorded as the unrevised rate for the previous week.
The advance number for insured unemployment was 3,299,000 for the week ending June 9. The four-week moving average for the advance number for insured unemployment increased by 5,250, to 3,293,750 compared to the revised average of 3,288,500 the previous week.
Fed Changes Outlook for 2012
The current jobless claim data depicts an ailing economy still struggling to create new jobs. Consequently, the Fed has lowered its expectations for bringing down the employment rate. The Federal Open Market Committee (FOMC) said its latest release on June 20, “Growth in employment has slowed in recent months, and the unemployment rate remains elevated.”
Earlier in the year, the Fed predicted rate of unemployed Americans would fall as low as 7.8 percent by the end of 2012. With the job market losing momentum, the Fed revised it figures to between 8 percent and 8.2 percent.
The Fed also reduced its expectations for economic growth. After the April meeting, the FOMC stated it believed the pace of the economy signified a growth rate as high as 2.9 percent for 2012. However, after the June meeting, the Fed scaled back it expectations for U.S. economic expansion to between 1.9 and 2.4 percent.
In a move, which the Fed anticipate will help stimulate the stagnant economy, the FOMC decided to invest an additional $267 billion into Operation Twist – a program initiated last September, which purchase long-term securities (6 to 30- year duration) and sell short-term holdings (3-year or less duration) in its portfolio.
The strategy puts downward pressure on interest rates on business loans and home mortgages. The Fed believes the move will motivate more business owners to invest in their operations, including the creation of more jobs and purchase of machinery and equipment.
Cheaper interest rates for home purchases and mortgage refinances frees up more cash for consumers, who, theoretically, will use the “extra” cash to buy more goods and services and bolster the employment outlook. Consumer expenditures make up 70 percent of spending in the American economy.