February 6, 2014 / 2:15 PM / 4 years ago

WRAPUP 2-U.S. jobs data improves, but weak exports may hurt growth

* New unemployment benefit claims fall 20,000 last week
    * Trade deficit widens to $38.7 billion in December
    * Exports fall 1.8 percent, imports tick up 0.3 percent
    * Productivity strong in Q4 but trend still weak

    By Lucia Mutikani
    WASHINGTON, Feb 6 (Reuters) - The number of Americans filing
new claims for unemployment benefits fell more than expected
last week, in a boost to the labor market outlook and the
broader economy.
    The upbeat news, however, was undermined somewhat by other
data on Thursday showing a slump in U.S. exports in December.
Economists said that suggested trade likely contributed a bit
less to fourth-quarter economic growth than previously believed
and it augurs poorly for the first three months of 2014.
    Even so, investors were heartened that the labor market
recovery appeared on track after some recent data had raised
concerns about the economy's health. Economists said a
government report on January hiring on Friday should send a
similar signal.
    "The underlying momentum in the labor market remains
positive and it is very likely that this is the narrative that
we get from tomorrow's employment report," said Millan Mulraine,
deputy chief economist at TD Securities in New York.
    Initial claims for state unemployment benefits declined
20,000 last week to a seasonally adjusted 331,000, the Labor
Department said. While the data has no direct bearing on
January's employment report, as it falls outside the survey
period, it bodes well for the jobs market.
    Hiring is expected to have accelerated in January after
being held down by unseasonably cold weather the prior month.
That would offer confirmation that the economy continued to
expand after robust growth in the second half of 2013 that was
driven by consumer spending, inventory accumulation and trade.
    So far, data for January have been mixed.
    Cold weather caused a sharp slowdown in factory activity and
held back automobile sales, and retailers on Thursday complained
of reduced traffic volumes because of the freezing temperatures.
    Kohl's Corp reported that sales last month were
"significantly" lower than expected. While some chains managed
to register sales gains, those came either at the expense of
rivals or profit margins. 
    On the other hand, reports on Wednesday showed relatively
strong hiring by private companies and an acceleration in
services sector activity after two months of slower growth.
    Stocks on Wall Street were trading higher on the claims
data, while U.S. Treasury debt prices fell. The dollar fell
against the euro after European Central Bank President Mario
Draghi said there is no euro zone deflation problem and left
interest rates unchanged.
    The largest decline in exports since October 2012 helped
widen the trade deficit by 12 percent in December to $38.7
billion, the Commerce Department said. When adjusted for
inflation, the trade gap rose to $49.5 billion.
    In its first estimate of fourth-quarter GDP last week, the
government said trade accounted for 1.33 percentage points of
the economy's 3.2 percent annual growth pace during the period. 
    However, the deficit in December was bigger than the
government had assumed, and economists said fourth-quarter GDP
growth would likely be lowered when a revision is published
later this month. 
    "The net contribution from trade will be much smaller than
the first estimate and could dial back the pace of
fourth-quarter growth by as much as half a percentage point,"
said Tim Quinlan, an economist at Wells Fargo Securities in
Charlotte, North Carolina.
    The deficit last year was the smallest since 2009, helped by
record exports and the first drop in imported goods in four
    In December, however, exports dropped 1.8 percent, even as
petroleum and food exports hit a record high, and imports edged
up 0.3 percent. Imports of consumer goods hit an all-time high,
but the impact was muted by a fall in the price of imported
crude oil, which hit its lowest level since February 2011.
    A separate report showed U.S. productivity rose at a strong
3.2 percent rate in the fourth quarter after an even brisker 3.6
percent pace in the third quarter as businesses managed to step
up output sharply while keeping a lid on hiring and hours
    Still, the underlying trend remained soft. For all of 2013,
productivity rose just 0.6 percent, the smallest gain since
    The rise in fourth-quarter productivity helped keep down
unit labor costs - a gauge of the labor-related cost for any
given unit of output. They fell at a 1.6 percent rate, showing
no wage inflation pressures in the economy. 
    For the year as a whole, unit labor costs were up just 1.0
percent, the weakest reading since 2010.
    "Declining labor costs combined with faster growth in worker
productivity suggests little pressure to add workers," said Jay
Morelock, an economist at FTN Financial in New York.
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