July 12, 2012 / 12:35 PM / 7 years ago

Jobless claims fall as plants put off retooling

WASHINGTON (Reuters) - The number of Americans signing up for new jobless benefits fell to a four-year low last week but an unusual pattern for summer factory shutdowns suggested layoffs might pick up again in coming weeks.

Job seekers attend a career fair at Rutgers University in New Brunswick, New Jersey, January 6, 2011. REUTERS/Mike Segar

A separate report on Thursday showed falling import prices, fresh evidence of a cooling global economy but also a reminder that a drop in gasoline prices could help U.S. consumers.

The Labor Department said new claims for state unemployment benefits dropped 26,000 last week to 350,000. That was the lowest since March 2008, the early days of the last recession.

A Labor Department official said the data, which is adjusted to account for normal seasonal swings, may have been skewed because some automakers postponed annual closures for retooling.

That means the temporary layoffs for retooling may have simply been postponed to allow manufacturers to keep up with sturdy demand, which in itself is a good sign for the economy.

“While today’s report does not signal a meaningful recovery in the labor market, it may point to continued strength in the auto sector,” said Jeffrey Greenberg, an economist at Nomura in New York.

The four-week moving average for new claims, a better measure of labor market trends, fell 9,750 to 376,500. That is a significant drop, although the average is only at its lowest point since May.

“It seems like the Labor Department is pretty adamant that this is more of a wonky seasonals adjustment than something we need to put too much stock in,” said Michael Hanson, U.S. economist at Bank of America-Merill Lynch. “The underlying trend in claims is probably still in the 370,000 range.”

U.S. stocks fell, hurt by concerns about the impact of a faltering global economy. U.S. bond prices rose, while the dollar fell against the yen.


Hiring by U.S. companies slowed dramatically in the second quarter as employers grew worried about a sagging global economy hurt by Europe’s snowballing debt crisis.

Many employers also are concerned over plans by the U.S. government to cut spending and let tax cuts expire next year, a jolt that could send the economy into recession.

Famed U.S. investor Warren Buffett said the U.S. economy has been about flat in recent months. “It’s not heading downward but it’s not growing at the rate that it was earlier,” he told CNBC.

One relative bright spot of late has been the housing sector. Data analysis firm CoreLogic said there were fewer U.S. homeowners in the first quarter who owed more on their mortgages than their homes were worth.

But at the same time, another data firm, RealtyTrac, said banks started foreclosure proceedings at a higher pace in June for the second month in a row.

In a report that highlighted weakness in the global economy, the Labor Department said import prices fell 2.7 percent in June, the most in more than three years. Most of the drop was due to a plunge in the cost of imported oil.

Oil prices have fallen as economic growth has cooled across Europe and in China. In a sign of global economic weakness, Indian IT heavyweight Infosys Ltd made a deeper-than-expected cut to its sales forecast.

While a slowing global economy is bad for the United States - many economists think U.S. growth also cooled in the second quarter - lower oil prices provide something of a silver lining.

For one, slowing inflation could give the U.S. Federal Reserve more scope to ease monetary policy. Minutes from the central bank’s June meeting, released on Wednesday, showed the Fed is open to buying more Treasury bonds to stimulate growth if necessary.

Also, lowering costs at the pump will leave Americans with more money to spend on other things, boosting the economy.

The data on import prices showed the cost of imported petroleum plunged 10.5 percent, the sharpest drop since December 2008.

Additional reporting by Chuck Mikolajczak in New York and Pedro da Costa in Washington; Editing by Neil Stempleman

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