The last week witnessed a sudden jump in new applications for unemployment benefits while the four-week average showing a healthy situation in the job market as it touched a record low since 15 April 2000.
The 15-year lowest level could be an all time low when adjusted for population growth numbers. The number of unemployed receiving benefits rose by 15,000 to 2.27 million in the week ended 1 August.
Unexpectedly, the new applications for unemployment benefits suddenly rose by 5,000 in one week taking the total average to 274,000 last week. However, the four-week average eased by1,750 to 266.250 indicating the 15-year lowest level, according to the latest data released by US Labor Department on 13 August. The latest numbers indicate that there were 1,000 fewer applications when compared with the previous report.
This is a healthy situation in the job market since the Great recession that recorded massive job loss of 8.5million. The drop in applications for jobless benefits also indicates rapid recovery in the US economy and also strong confidence among the employers.
Labor Department registered a drop of 10.7% in the number of applications during the past 12 months. In July alone, the US economy witnessed the creation of a net 215,000 jobs as the unemployment rate remained at 5.3%. The recovery in the US economy generated 5.6 million new jobs during the past two years. However, the pay rise is yet to gain speed in the industry, which is creating more new jobs.
The favorable conditions in the US economy are boosting the investor confidence and creating more demand for the corporate sector. Hence, there wouldn't be any need for industry to trim headcount to save costs. Rather, the industry prefers to hire more people to meet the growing requirements.
Mostly the non-farm payrolls added to more job creation as the number rose by 215,000 in July pulling the unemployment rate down to 5.3% registering seven-year low level.
The drop in new applications for unemployment benefits indicates the improvement in the US job market. The gradual growth in the employment generation and drop in the unemployment rate has failed to boost wage level. The salaries are still hovering at their previous levels. The average hourly wages during the past 12 months rose meager 2.1% in July. This is much less than the normal growth of 3.5-4% in economies that are doing well.
Industry experts attribute the major reason for a sluggish pay rise to low productivity. The per capital productivity per hour is very less. It just grew only 0.3% during the past 12 months as against the average of 2.2% in the last six decades. The per capital productivity is the benchmark for employee efficiency.
The US Federal Reserve considers that the average rate of 5-5.3% is ok, but it also indicates lower inflation. The 5.3% unemployment rate is considered to be stable.
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