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WRAPUP 4-U.S. jobless claims drop, signaling labor market gains
March 7, 2013 / 2:12 PM / 5 years ago

WRAPUP 4-U.S. jobless claims drop, signaling labor market gains

* Jobless claims fell by 7,000 last week
    * Four-week average of claims lowest since 2008
    * Trade deficit widens to $44.45 bln in January
    * Trade likely to be a small drag on first-quarter growth

    By Lucia Mutikani
    WASHINGTON, March 7 (Reuters) - The number of Americans
filing new claims for unemployment benefits unexpectedly fell
last week, suggesting a pick-up in the labor market recovery and
the pace of economic growth. 
    The data on Thursday was the latest to indicate the
economy's resilience in the face of higher taxes, although a
separate report showing the U.S. trade gap widened in January
dimmed the near-term outlook a bit.
    "Fundamentally, we are getting on a little better footing
right now," said Omair Sharif, an economist at RBS in Stamford,
    Initial claims for state jobless aid fell 7,000 to a
seasonally adjusted 340,000, the Labor Department said. It was
the second straight weekly drop, and it confounded economists'
expectations for a rise to 355,000.
    The four-week moving average for new claims, a better
measure of labor market trends, fell 7,000 to 348,750 - the
lowest level since March 2008.
    A 2 percent payroll tax cut ended and tax rates went up for
wealthy Americans on Jan. 1. In addition, $85 billion in federal
budget cuts that could slice as much as 0.6 percentage point
from growth this year started on March 1.
    Against the backdrop of tighter fiscal policy, economists
were encouraged by the drop in claims. 
    "It suggests that some jobs are being created and there is
income that is falling into the consumers' pockets," said Sam
Bullard, a senior economist at Wells Fargo Securities in
Charlotte, North Carolina. 
    In another sign of improving economic conditions, household
debt grew at its fastest pace since early 2008 in the fourth
quarter of last year, the Federal Reserve said in a report.
    Other reports showed steady job gains and a pick-up in tax
refunds helped to boost sales at several retailers in February. 
    The new reports added to recent data on housing and factory
activity that have pointed to an acceleration in growth.
    "As we start the year, first-quarter growth is going to be
substantially stronger than where we ended last year," said
    The economy grew at a 0.1 percent annual rate in the fourth 
quarter. Growth estimates for the first three months of this
year range as high as 2.8 percent, mostly reflecting a pick-up
in the pace at which businesses are restocking.
    In a separate report, the Commerce Department said the trade
deficit widened to $44.45 billion in January from $38.14 billion
in December. Exports fell, giving back the bulk of December's
gains, while imports rebounded after being held down by
disruptions to port activity in the prior months.
    The inflation-adjusted trade deficit widened to $48.0
billion from $44.2 billion in December. Economists said this
implied trade would be a small drag on first-quarter growth. 
    "The sharp deterioration in trade shaves a bit from the
outlook for growth in the first quarter," said Diane Swonk,
chief economist at Mesirow Financial in Chicago. "There are
signs that domestic demand is firming, which would provide a
major offset to weakness abroad."
    U.S. stocks closed slightly higher on the claims data, with
the Dow Jones industrial average hitting a record high
for a third straight day. U.S. Treasury debt prices fell and the
dollar weakened against a basket of currencies.
    While the claims data fell outside the survey period for the
government's report on February employment due on Friday,
economists said they would not be surprised if job growth during
the month beat expectations. A report on Wednesday had shown
private employers hired more workers than expected last month.
    According to a Reuters survey of economists, employers
probably added 160,000 jobs last month, a small pick-up up from
January's 157,000 count. That would just be enough to hold the
jobless rate steady at 7.9 percent. 
    Economists say job gains of at least 250,000 per month are
needed over a sustained period to significantly dent the ranks
of the unemployed. Job growth averaged 200,000 in the three
months through January.
    High unemployment prompted the Federal Reserve last year to
launch an open-ended bond buying program to keep borrowing costs
low. The U.S. central bank said it would keep up the program
until there was a substantial improvement in the outlook for the
labor market.
    In testimony to Congress last week, Fed Chairman Ben
Bernanke signaled the central bank would press forward with
plans to buy $85 billion in bonds per month.
    While layoffs have ebbed, companies are not in a hurry to
step up hiring as demand remains lackluster. Claims are tucked
in the low end of a 330,000 to 375,000 range for this year.
    Another report showed planned layoffs at U.S. companies rose
for the second month in a row in February as the financial
sector cut the most employees in over a year. Still, planned
layoffs remain at historic low levels.
    "The rise in financial industry job cut announcements
appears to have been driven by planned layoffs in the mortgage
business at one large bank," said John Ryding, chief economist
at RDQ Economics in New York.

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