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* Weekly jobless claims up 16,000, largest gain since
* Four-week average of claims increases 3,500
* Productivity rises at 1.6 percent rate in third quarter
By Lucia Mutikani
WASHINGTON, Nov 5 New U.S. applications for
unemployment benefits last week recorded their largest increase
in eight months, but remained at levels consistent with a fairly
healthy labor market.
Other data on Thursday showed a surprise rise in
productivity in the third quarter after a drop in
self-employment led to overall hours worked falling for the
first time in six years, restraining labor-related production
Initial claims for state unemployment benefits increased
16,000 to a seasonally adjusted 276,000 for the week ended Oct.
31, the Labor Department said. It was the largest weekly
increase since late February.
Still, last week marked the 35th straight week that claims
were below the 300,000 threshold normally associated with a
strong jobs market. Claims had hovered near 42-year lows for
much of October.
"There is no evidence that there has been a pickup in
involuntary job separations and we continue to expect an
increase of 200,000 in private payrolls in October," said John
Ryding, chief economist at RDQ Economics in New York.
The four-week moving average of claims, considered a better
measure of labor market trends as it strips out week-to-week
volatility, rose 3,500 to 262,750 last week.
Last week's claims report has no bearing on the October
employment report due for release on Friday. According to a
Reuters survey of economists, nonfarm payrolls rose 180,000 in
October, well above the average gain of 139,000 jobs for August
and September. The unemployment rate is forecast at 5.1 percent.
Solid payroll gains in October could seal the case for a
December interest rate increase from the Federal Reserve.
The claims report showed the number of people still
receiving benefits after an initial week of aid increased 17,000
to 2.16 million in the week ended Oct. 24. The four-week moving
average of continuing claims, however, fell to the lowest level
since November 2000.
The trend in continuing claims suggests more long-term
unemployed are finding work, consistent with a low jobless rate.
The dollar was little changed against a basket of
currencies, while price for U.S. Treasuries fell. Stocks on Wall
Street were trading lower.
WEAK PRODUCTIVITY TREND
In a second report, the Labor Department said productivity,
which measures hourly output per worker, increased at a 1.6
percent annual rate after advancing at an upwardly revised 3.5
percent rate in the second quarter.
Manufacturing productivity grew at its fastest pace in four
years, led by the durable goods sector. Economists had expected
productivity to contract at a 0.2 percent rate in the
July-September quarter after expanding at a previously reported
3.3 percent pace in the second quarter.
Despite the surprise rise in the third quarter, the trend in
productivity remained weak. Productivity increased only 0.4
percent from the same period last year. That was a slowdown from
0.8 percent in the second quarter.
Economists blame softer productivity on a lack of
investment, which they say has led to an unprecedented fall in
"The nature of much tech investment these days may not be
doing much to help productivity. Mobile apps that make it easier
to waste time at work may be leisure enhancing, but they don't
support labor productivity," said Ted Wieseman, an economist at
Morgan Stanley in New York.
While weak productivity has boosted employment growth as
companies hired more workers to increase output, it has
contributed to stagnant wages and lowered the economy's speed
limit. Persistently anemic productivity could continue to limit
wage growth even as the labor market approaches full employment.
In the third quarter, hours worked declined at a 0.5 percent
rate, the first drop since the third quarter of 2009. That
reflected a fall in self-employment as well as adjustments to
hours for nonprofit and government enterprise workers.
Unit labor costs, the price of labor per single unit of
output, increased at a 1.4 percent rate in the third quarter
after dropping at a 1.8 percent rate in the prior quarter. Unit
labor costs rose 2.0 percent compared to last year.
Economists say a tightening labor market could boost
productivity as employers seek to cut production-related costs.
"As qualified labor is becoming scarce and the unemployment
rate has now reached a level that historically has been
associated with building wage pressures, firms may be more
motivated to invest in labor-saving equipment that could lead to
an acceleration in output per hour," said Kevin Cummins, a
senior economist at RBS in Stamford, Connecticut.
(Reporting By Lucia Mutikani; Editing by Andrea Ricci)