Jobless claims drop, signaling labor market gains

WASHINGTON Thu Mar 7, 2013 4:44pm EST

A job seeker (R) meets with a prospective employer at a career fair in New York City, October 24, 2012. REUTERS/Mike Segar

A job seeker (R) meets with a prospective employer at a career fair in New York City, October 24, 2012.

Credit: Reuters/Mike Segar

WASHINGTON (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, Connecticut.

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 January 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 Bullard.

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.

LAYOFFS HAVE EBBED

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.

(Additional reporting by Doug Palmer, editing by Tim Ahmann and Chizu Nomiyama)

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Comments (13)
Crash866 wrote:
According to a Reuters survey of economists, employers probably added 160,000 jobs to their payrolls 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.

So the rate remains at 7.9

Economists say job gains of at least 250,000 per month over a sustained period are needed to significantly dent the ranks of the unemployed. Job growth averaged 200,000 in the last three months.

Anyone betting on 250,000 per month gain over a sustained period anytime soon?

Mar 07, 2013 9:08am EST  --  Report as abuse
Tig1029 wrote:
Total LIES. Basically what this is ACTUALLY saying is unemployment benefits ended for many, who are still most likly un-employed, but no longer can recieve any benefits because the un-employment benefits only last for a certain amount of time. Also this is not including ANYONE who was DENIED benefits, and it also does not include those who did not apply for benefits in the first place. So for them to LEGITIMATELY say that unemployment is falling, ALL factors need to be counted, not just what they want to count. Also they need to state how many of those claims went away because of end of benefits.

Mar 07, 2013 9:16am EST  --  Report as abuse
phillman5 wrote:
Crash866 and Tig1029, Isn’t the first line of this article saying the number of initial unemployment claims decreased to 340,000. This is nothing about the total unemployment. Later is says

While layoffs have subsided, companies are not in a hurry to step up hiring as domestic demand remains lackluster.

But the numbers don’t seem to add up to me. It says

Employers announced 55,356 planned job cuts last month, up nearly 37 percent from 40,430 in January

So with only 55,000 job cuts, where does the 340,000 initial unemployment claims come from?

Mar 07, 2013 9:59am EST  --  Report as abuse
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