WRAPUP 4-U.S. jobless claims point to healing in labor market

Thu Feb 7, 2013 3:30pm EST

* New jobless claims fall 5,000 in latest week
    * Trend reading for claims at lowest since March 2008
    * Productivity declines at 2 percent annual rate in 4th
quarter
    * Major retailers' same-store sales up in January

    By Jason Lange
    WASHINGTON, Feb 7 (Reuters) - The number of Americans filing
new claims for jobless benefits fell last week and a trend
reading hit a near five-year low,  signs a grinding recovery in
the labor market remains on track.
    Other reports on Thursday showed many top U.S. retailers had
strong sales in January even as customers were hit with higher
taxes, while productivity at businesses slumped in the fourth
quarter.
    Initial claims for state unemployment benefits dropped by
5,000 to a seasonally adjusted 366,000, the Labor Department
said. That was enough to pull down a four-week moving average of
new claims, a gauge of the trend in layoffs, by 2,250 to
350,500, its lowest since March 2008.
    "The labor market is improving, but certainly not at a
robust rate by any means," said Russell Price, an economist at
Ameriprise Financial in Troy, Michigan.
    While employers have pulled back on layoffs, they have only
added jobs at a lackluster pace. Economists say the tepid labor
market recovery means the Federal Reserve is likely to keep
buying bonds into next year to keep U.S. borrowing costs low.
    In a sign of the difficulty many people have in finding a
job, the number of people still receiving benefits under regular
state programs after an initial week of aid increased 8,000 to
3.22 million in the week ended Jan. 26.
    The data came as little surprise to U.S. financial markets,
which focused on events in Europe. U.S. stock prices and
yields on U.S. government debt fell on worries about
the economic outlook in Europe, which were fanned by European
Central Bank President Mario Draghi's comments that policymakers
are monitoring the economic impact of a stronger euro.
    
 
    
    PRODUCTIVITY SLUMPS
    The U.S. economy has shown signs of underlying strength
despite a surprise contraction in the fourth quarter.
    Consumer spending has looked more robust, and many U.S.
retailers on Thursday reported strong sales in January. 
    Overall, same-store sales rose 5 percent in January across
20 retailers, according to Thomson Reuters I/B/E/S, pointing to
some resilience in spending despite a hike in payroll taxes that
hit most Americans last month. 
    The Commerce Department's more comprehensive report on
January retail sales, due on Feb. 13, is expected to show sales
edged higher from December when adjusted for seasonal swings.
    Consumers are borrowing rather readily, a sign of confidence
in the recovery. Consumer credit increased by $14.59 billion in
December, the Federal Reserve said in a report. 
    The gains were driven by the biggest increase in
non-revolving credit, which includes student and auto loans,
since November 2001. That was shortly after the September 11,
2001 attacks when automakers were offering zero-percent
financing and other incentives to lure consumers back to their
showrooms.
    Separately, the Labor Department said U.S. nonfarm
productivity fell in the fourth quarter by the most in nearly
two years as output increased only marginally despite steady
gains in employment.
    Productivity declined at a 2 percent annual rate, the
sharpest drop since the first quarter of 2011 and a larger fall
than the 1.3 percent forecast in a Reuters poll. 
    Productivity is expected to rebound in the current period
because analysts believe weak output during the fourth quarter
was partially due to temporary factors like an unusually sharp
decline in government spending on the military.
    The drop in productivity combined with a big gain in hourly
compensation to drive unit labor costs, a gauge of the
labor-related cost for any given unit of output, up at a sharp
4.5 percent rate in the fourth quarter.
    Hourly compensation, which includes wages as well as
employer contributions to social insurance and private benefit
plans like health care, rose at a 2.4 percent rate.
    The compensation-related jump in unit labor costs could be a
harbinger of growing price or profit pressures, but analysts
said they did not expect it to be maintained.
    "We do not think this report is indicative of a meaningful
increase in wage inflation," said Daniel Silver, an economist at
JPMorgan in New York.
    Moreover, the report also showed gains in compensation are
not keeping up with rising prices, a bad signal for the ability
of households to boost consumption. 
    Adjusted for inflation, hourly compensation rose only 0.3
percent in the fourth quarter and was down 0.4 percent over the
full year, the second straight annual decline.
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