Jobless claims rise, retailers warn on outlook

Visitors search for job possibilities on the Internet at Workforce Central Florida in Casselberry, Florida July 3, 2003. The number of U.S. workers filing new claims for jobless benefits jumped last week but the outcome was skewed by school layoffs, while soaring petroleum costs drove import prices to a 10-month high in March.

WASHINGTON (Reuters) - The number of U.S. workers filing new claims for jobless aid jumped to the highest level in two months last week, while retailers warned of softer sales in April after a stronger-than-expected March, suggesting some weakness in the economy.

U.S. import prices, meanwhile, jumped 1.7 percent in March as petroleum prices surged, but prices for non-petroleum imports were up just 0.3 percent, data showed on Thursday.

An unexpected 19,000 jump in jobless claims for the week ended April 7 was at least partly due to temporary layoffs associated with school holidays, the Labor Department said, but economists said the data could indicate tightness in the labor market was beginning to ease.

Similarly, while retailers reported stronger-than-forecast sales in March, helped by an early Easter and pent-up demand after a cold February, investors focused on retailer forecasts for weaker sales in April.

"The million-dollar question is whether the downside risks to the economy are accelerating. The unemployment claims would be a key indicator there," said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.

Stocks closed higher as biotechnology stocks gained and strong retail sales data relieved fears about consumer spending. The Dow Jones Industrial Average closed up 68.34 points or 0.55 percent to end 12,552.96.

The International Council of Shopping Centers said U.S. chain story sales rose by 5.9 percent, the strongest monthly increase since April 2006 when sales grew by 6.7 percent.

SpendingPulse, the retail data service of MasterCard Advisors, an arm of MasterCard Worldwide (MA.N), said consumer spending outside the auto sector rose 0.3 percent in March.

Wal-Mart Stores Inc., (WMT.N), the world's largest retailer, posted a better-than-expected 4 percent rise in March sales at U.S. stores open at least a year.

But the Arkansas-based retailer said that meeting its quarterly earnings forecast would be a challenge, given the tough sales outlook for April.

SPRING BREAK EFFECT

Initial filings for state unemployment insurance aid for the week ended April 7 rose to the highest level in two months to a seasonally adjusted 342,000 from an upwardly revised 323,000 the prior week, the Labor Department said.

A department analyst said seasonal adjustments of jobless claims had difficulty accounting for the weeks in which U.S. schools close for "spring break." The closures come at different times in different states, and can affect employment in businesses as well as schools.

"If that's a clear print, that's worth watching," Chris Probyn, chief economist for State Street Global Advisors in Boston, said of the rise in new claims. "It's too soon for us to read too much into the claims data because of the seasonality this time of the year."

Analysts on Wall Street had expected claims to slip to 320,000 from a revised 321,000 the prior week.

The four-week moving average, which flattens weekly volatility to provide a better sense of underlying job-market trends, rose to 323,250 from 316,250 in the prior week.

The total number of unemployed still on the benefit rolls after drawing an initial week of aid rose by 38,000 to 2.53 million in the week ended March 31, the latest period for which these figures are available. It had been expected to come in at 2.50 million.

Probyn said the rise in so-called continued claims was a sign labor conditions were loosening because it suggested firms, while reluctant to lay off workers, also were cautious about hiring.

The 1.7 percent rise in import prices came after a slim 0.1 percent increase in February. Export prices rose 0.7 percent in March, matching the 0.7 percent rise in February.

Import prices are scrutinized by the Federal Reserve as a potential source of inflation in the production pipeline.

In the minutes of the March 20-21 meeting released on Tuesday, the Fed said recent increases in prices for energy and some non-energy imports might boost overall inflation in the near term and might put some upward pressure on core prices.

Capital goods import prices fell 0.1 percent in March, automotive vehicles and parts rose 0.1 percent while consumer goods excluding autos were 0.2 percent higher.

(Additional reporting by Richard Leong and Nicole Maestri in New York and Karen Jacobs in Atlanta)