Joblessness Rate Continues to Drop as U.S. Economy Recovers

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According to the U.S. Department of Labor, the rate of joblessness is on the decline. At the end of last week, Americans filing for unemployment were continuing on a downward trend that’s been apparent since the start of the fiscal year of 2013. Claims dropped by 23,000, down to just 340,000 from 360,000 the week prior. The lower number defeated even what analysts and Bloomberg had speculated by 5,000.

These newer, lower numbers quashed any worries that joblessness claims were going to rise after last month, something that cautious analysts said was a possibility. While unemployment levels are low, experts advise that the economy has yet to see the fallout from the jobs lost from the sequester, warning that there could still be some bumps in the road ahead.

“Today’s report remained consistent with our expectation that underlying improvement in labor market conditions will allow for continued respectable job growth despite significant fiscal contraction. ” Nathan Janzen, an economist at RBC Economics, noted in a report.

“While we still believe payroll growth will moderate between the first and second quarters as fiscal tightening weigh on the economy,” stated Daniel Silver, an analyst with JPMorgan Chase & Co, “the claims data suggest that the weakening in the labor market will not be very severe.”

Still, many analysts worry about the impact of the sequester. States like Virginia, Pennsylvania and D.C. were hit the hardest, with the states declaring that they could lose a substantial portion of their economy due to defense budget drawbacks and sequester related funding cessation. The brunt of the sequester remains yet to be seen for the time being.

“The recovery is gaining traction,” said Alan Krueger, chairman of the White House Council of Economic Advisers. But the sequestration, he said, “is an unnecessary headwind. It’s something that will slow the expansion. We’re poised for stronger growth if we don’t get in the way with misguided fiscal policy.”

With an improving economy and home sales on the rise, speculation exists as to whether or not the Fed will lower or raise interest rates. However, in lieu of the recession and looming economic issues in Spain and Cyprus – as well as in other parts of the eurozone – it is unlikely that the Fed will raise rates any time soon.

“The report is not a game-changer for the Fed,” said Julia Coronado, chief North American economist at BNP Paribas. “The labor market is clearly moving in the right direction, although it is a slow improvement.”