* U.S. new jobless claims fall for third straight week
* Continuing claims drop for 1st time since start of year
* Productivity accelerates in 1st qtr, hours worked plunge
(Adds Fed official, closing market prices)
By Lucia Mutikani
WASHINGTON, June 4 Fewer U.S. workers filed new
claims for jobless benefits for a third straight week last week
and productivity rose faster than expected in the first
quarter, data showed on Thursday, supporting budding hopes that
the recession is losing force.
The Labor Department said first-time applications for state
unemployment insurance benefits fell 4,000 to 621,000 in the
week ended May 30. It also said the number of people still on
the benefit rolls after an initial filing fell in the prior
week for the first time since the start of the year. For more
"It's still bad, but not as bad as it has been. It's
consistent with the story that the economy is turning the
corner and we may have passed the worst point (of the
recession)," said Bill Cheney, chief economist at John Hancock
Financial Services in Boston.
U.S. stocks .DJI ended 0.9 percent to 1.3 percent higher
on the data. Government bond prices US10YT=RR fell sharply
and the yield gap between two-year and 10-year notes steepened
to 276 basis points, just shy of its record wide 277 basis
points set this week.
U.S. mortgage rates jumped to their highest in almost six
months in the week to June 4, which could complicate the
economy's anticipated recovery from the housing-led downturn if
the trend is sustained. [ID:nN04209574].
A string of recent data -- from gains in home sales to
rising consumer confidence -- has supported growing optimism
that economic growth would resume in the second half of the
year. But consumers have turned decidedly thrifty and the
recovery likely won't be vigorous enough to create many jobs.
Reports from many retailers showed sales fell short of
forecasts in May as consumers focused on basics.
Cleveland Federal Reserve Bank President Sandra Pianalto
told a conference in Louisville, Kentucky that the economy's
extreme weakness was moderating, but recovery would be slow and
marked by lingering high unemployment. [ID:nN04120427]
NEW CLAIMS CLOSELY WATCHED
Analysts are closely monitoring initial jobless claims for
signs of stability in the labor market, which has been hard hit
by the recession. They say new filings will have to drop below
600,000 per week to suggest a steadying unemployment rate.
Nonfarm payrolls data for May, due for release on Friday,
are expected to show U.S. employers cut 520,000 jobs that month
after shedding 539,000 in April. The unemployment rate is
forecast to rise to 9.2 percent from 8.9 percent in April.
The report on unemployment insurance claims did offer some
rays of hope for the labor market. The number of people staying
on the benefit rolls fell 15,000 to 6.74 million in the week
ended May 23, the latest week for which data is available.
This was the first time that so-called continued claims
have declined since the week of Jan. 3 and was the first time
in 17 weeks that they did not set a fresh record high.
The insured unemployment rate, which measures the
percentage of the insured labor force who are jobless, has now
held at 5 percent for three straight weeks.
Some analysts drew little comfort from the drop in
"Given the long streak of the increases it could be
meaningless volatility. It could reflect that some workers who
have been receiving standard benefits for a very long time may
have exhausted their benefits before finding new employment,"
said Zach Pandl, economist at Nomura Securities in New York.
The four-week moving average for continuing claims rose
88,750 to a record 6.69 million in the week ended May 23.
Aggressive job cutting by companies seeking to protect
profits lifted business productivity more than initially
estimated in the first quarter, a second report from the Labor
Nonfarm productivity rose at a revised 1.6 percent annual
rate, the fastest since the third quarter of 2008. This beat
initial estimates of a 0.8 percent increase published last
month and the 0.6 percent drop in the fourth quarter.
Hours worked plunged at a 9 percent annual rate in the
first quarter, the largest decline since the first quarter of
1975. Hours worked in manufacturing tumbled at an annual rate
of 19.5 percent, the biggest quarterly drop on record.
"Employers laid off workers at about the same pace as they
were losing sales, so productivity has stayed healthy. It does
suggest that as soon as demand turns up they will have to start
hiring people," said John Hancock Financial Services' Cheney.
Unit labor costs, a gauge of inflation and profit pressures
closely watched by the Federal Reserve, increased 3.0 percent
in the first quarter, below the 3.3 percent previously reported
and well off the fourth quarter's 5.1 percent pace.
(Additional reporting by Julie Haviv in New York and Steve
Robrahn in Louisville; Editing by James Dalgleish)