WRAPUP 3-Three-month low in U.S. jobless claims offers hope for labor market

Thu Mar 6, 2014 1:08pm EST

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* Weekly jobless claims fall 26,000, hit 3-month low
    * Factory orders fall 0.7 percent in January
    * Fourth-quarter productivity growth slashed to 1.8 percent

    By Lucia Mutikani
    WASHINGTON, March 6 (Reuters) - The number of Americans
filing new claims for jobless benefits hit a three-month low
last week, suggesting some strength in a labor market that has
been hobbled by severe weather. 
    Other data on Thursday showed a second straight monthly
decline in factory orders in January, likely because unusually
cold and snowy weather disrupted activity.
    Initial claims for state unemployment benefits tumbled
26,000 to a seasonally adjusted 323,000, their lowest level
since the end of November, the Labor Department said.
    "Initial claims returned to a more normal level, consistent
with healthy labor market conditions," said Yelena Shulyatyeva,
an economist at BNP Paribas in New York. 
    Stocks on Wall Street were trading high on the claims data,
while prices for U.S. Treasury debt fell. The dollar rose
against the yen, but fell versus the euro as the European
Central Bank kept interest rates on hold. 
    The drop in first-time claims exceeded economists'
expectations and suggested labor market fundamentals remain
relatively strong, despite other data that have shown cold 
temperatures dampened hiring in recent months.
    A closely watched government report on employment due on
Friday is expected to show weather weighed on jobs growth for a
third straight month in February, although not as heavily as in
the prior two months.
    Nonfarm payrolls are forecast to have increased by 150,000
jobs in February, according to a Reuters survey of economists,
up from gains of 113,000 in January and 75,000 in December.     
The claims data has no bearing on that report as it fell outside
the survey's reference period. 
    "The underlying level of payroll growth is around 200,000
per month," said John Ryding, chief economist at RDQ Economics
in New York. "The last two employment reports have not fully
captured the underlying strength of the labor market and we
expect a catch-up report at some point."
    
 

    WEATHER HURTS MANUFACTURING
    Freezing temperatures have also weighed on home building and
retail sales. The Federal Reserve said on Wednesday severe
weather had led to slower growth or outright contraction in some
areas of the country in recent weeks. 
    It also appears to have been a drag on manufacturing in
January.
    The Commerce Department said new orders for manufactured
goods declined 0.7 percent after falling 2.0 percent in
December. Shipments fell for a second straight month.
    Another report showed a sharp downward revision to business
productivity in the fourth quarter, suggested firms may need to
step up hiring soon to maintain output.
    Productivity rose at a 1.8 percent annual rate instead of
the previously reported 3.2 percent pace. It had increased at a
3.5 percent pace in the third quarter.
    "Slower productivity might push employers to boost hiring,"
said Jennifer Lee, a senior economist at BMO Capital Markets in
Toronto. 
    Unit labor costs - a gauge of the labor-related cost for any
given unit of output - were revised to show them falling at a
0.1 percent rate in the fourth quarter, indicating no
wage-related inflation pressures in the economy.
    They had previously been reported to have dropped at a 1.6
percent rate. They fell at a 2.1 percent rate in the third
quarter.
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