WASHINGTON (Reuters) - New claims for unemployment benefits in the United States fell more than expected last week, pointing to further healing in the nation’s battered jobs market.
Jobless claims have zig-zagged in the last few weeks, but the trend - reinforced by the latest drop - suggests employers have grown less eager to lay off workers, offering hope they could also step up hiring.
Initial claims for state unemployment benefits slid 12,000 last week to 367,000, the Labor Department said on Thursday.
“The big whacking of workforces is over, and we’re just waiting for pickup in activity to lift hiring a bit more strongly,” said Pierre Ellis, an economist at Decision Economics in New York.
The data helped lift U.S. stocks, while the dollar was about flat against a basket of currencies.
The United States is still limping back from the 2007-09 recession, but job growth has gained momentum in recent months and the unemployment rate dropped to 8.5 percent in December, its lowest level in nearly three years.
Still, dark clouds remain over the economy as Europe struggles with a sovereign debt crisis and likely recession.
Federal Reserve Chairman Ben Bernanke told lawmakers on Thursday that Europe’s crisis still threatens the U.S. recovery, and pledged the Fed would do everything it can to prevent any spillover.
In an example of the threat Europe poses for U.S. companies, Dow Chemical Co said its quarterly profit missed Wall Street’s expectations as it cut capacity in Europe, where the debt crisis has sharply affected exports and where demand for Dow’s products is weakest.
Economists and investors will look to a report on U.S. employment for January on Friday to get a firmer fix on the health of the labor market.
The report is expected to show the jobless rate held steady while payroll growth slowed a bit from December.
While Thursday’s claims data has no direct bearing on the payroll report, analysts said the trend in claims was nonetheless positive.
A four-week moving average for initial filings fell 2,000 to 375,750, and claims have been lower than 400,000 for eight of the last 10 weeks. Economists see that level as a dividing line between an improving and deteriorating labor market.
“This is certainly a positive in front of nonfarm payrolls and further supports the view that the U.S. economy is creating more jobs,” said Michael Woolfolk, a currency strategist at BNY Mellon in New York.
The number of people still receiving benefits under regular state programs after an initial week of aid fell 130,000 to 3.437 million in the week ended January 21, the lowest since September 2008.
A separate Labor Department report showed growth in U.S. nonfarm productivity slowed in the fourth quarter. Some analysts said that suggested companies might be closer to squeezing all they can out of their current staff.
“For the moment that’s a good thing because it means that any expansion in demand will lead to hiring,” said Ellis.
Indeed, Ian Shepherdson, an economist at High Frequency Economics, said the report raised the possibility that unemployment could fall faster than the U.S. central bank is now expecting.
The Fed last week acknowledged some improvement in the labor market but said the jobless rate remained too high and that it would likely keep overnight lending rates near zero until at least late-2014. Fed policymakers’ central forecast expects unemployment will end this year between 8.2 and 8.5 percent.
The report on jobless claims showed the number of Americans on emergency unemployment benefits rose 100,392 to 3.022 million in the week ended January 14, the latest week for which data is available.
A total of 7.67 million people were claiming benefits during that period under all programs, little changed from the prior week.
Additional reporting by Emily Flitter and Ellen Freilich in New York; Editing by Andrea Ricci and Padraic Cassidy