U.S. unemployment claims unexpectedly dropped last week to a eight-year low, according to data from the U.S. Labor Department Thursday. Weekly applications for unemployment aid dropped 19,000 to a seasonally adjusted 248,000, according to the department.
The four-week average declined 7,250 to 302,000, according to ABC News. Claims for jobless aid have been falling for the past three months, but last week’s drop makes for the lowest reading since February 2006, nearly two years before the Great Recession started.
Applications are a proxy for layoffs, so a lower number means that more employers are holding onto their workers. It is also a sign of potential income gains, increased hiring, and confidence that the economy is recovering. The recent drop-off points to a high amount of jobs added in July, raising expectations for the monthly employment report to be released August 1.
Employers added 288,000 jobs in June, the fifth straight month of job gains above 200,000. That streak is the first of its kind since 1999. The unemployment rate also fell to 6.1 percent, the lowest since September 2008. In a separate report, the government said that total layoffs in May dropped below pre-recession levels.
Sam Bullard, senior economist with Wells Fargo Securities in Charlotte, North Carolina, told Reuters of the numbers released Thursday, “This is consistent with another payroll reading for July, but it will probably not be as strong as June.”
Job openings are at their highest level in seven years, according to reports, while more workers are quitting their jobs, rather than being laid off. Workers usually quit their jobs only when they have an offer for a better position or the confidence that they can find one easily.
Jennifer Lee, an economist at BMO Capital Markets, predicted, “All in, it looks like we may be in for another solid payroll report.”
While the economy appears to be recovering from the recession, housing continues to lag behind. A report earlier this week indicated that existing home sales were at an eight-month high in June. Another report Thursday from the Commerce Department showed that new home sales dropped 8.1 percent, the largest decline since July last year.
Despite the lower new home sales rates, experts believe the economy will continue to recover from the 2008 recession. Should the labor market continue to rise faster than predictions, the Fed could raise interest rates sooner and more rapidly than anticipated, according to Federal Reserve Chair Janet Yellen.
Economists don’t expect the U.S. central bank to start raising interest rates until the second half of 2015. With the drop in U.S. unemployment claims, it’s possible that timeline could change.