Jobless Claims Fall Unexpectedly, Hinting at a Pickup

The decline in jobless claims, released on Thursday, may foreshadow a strong report on February employment.

The figures were the latest to indicate the economy’s resilience amid higher taxes, although a separate report showing that the United States trade gap widened in January dimmed the near-term outlook a bit.

“Fundamentally, we are getting on a little better footing right now,” said Omair Sharif, an economist at the Royal Bank of Scotland in Stamford, Conn.

Initial claims for state jobless aid fell 7,000 last week to a seasonally adjusted 340,000, the Labor Department said. It was the second consecutive weekly decline, and it confounded economists’ expectations for an increase to 355,000.

The four-week moving average for new claims, a better measure of labor market trends, fell 7,000 to 348,750, the lowest level since March 2008.

On Jan. 1, a 2 percent payroll tax cut ended and tax rates rose for wealthy Americans. In addition, $85 billion in federal budget cuts took effect on March 1 that could slice as much as 0.6 percentage point from growth this year.

Economists were encouraged by the drop in claims. “It suggests that some jobs are being created, and there is income that is falling into the consumers’ pockets,” said Sam Bullard, a senior economist at Wells Fargo Securities.

In another sign of improving economic conditions, household debt grew at its fastest pace since early 2008 in the fourth quarter of 2012, the Federal Reserve said in a report. Consumers continued to increase their borrowing in January from December, adding $16.2 billion in debt.

Meanwhile, a separate report showed that worker productivity fell at its fastest pace in four years in the fourth quarter, but the decline was likely to be temporary as economic growth is expected to increase after stalling in late 2012.

“First-quarter growth is going to be substantially stronger than where we ended last year,” Mr. Bullard said.

The economy grew at a 0.1 percent annual rate in the fourth quarter. Growth estimates for the first three months of this year range as high as 2.8 percent, mostly reflecting an increase in the pace of business restocking.

The Commerce Department reported that the trade deficit widened to $44.45 billion in January from $38.14 billion in December. Exports fell, giving back the bulk of December’s gains, while imports rebounded after being depressed by disruptions to port activity in the previous months.

The inflation-adjusted trade deficit widened to $48 billion from $44.2 billion in December. Economists said this suggested that trade would be a small drag on first-quarter growth.

“The sharp deterioration in trade shaves a bit from the outlook for growth in the first quarter,” said Diane Swonk, chief economist at Mesirow Financial. “There are signs that domestic demand is firming, which would provide a major offset to weakness abroad.”

While the latest jobless claims data fell outside the period for the government’s report on February employment due on Friday, economists said they would not be surprised if job growth during the month beat expectations.

A Reuters survey of economists said employers probably added 160,000 jobs last month, a small increase from 157,000 in January. That would just be enough to hold the jobless rate steady at 7.9 percent.

Economists say job gains of at least 250,000 a month are needed to significantly reduce unemployment. Job growth averaged 200,000 in the three months through January.

Worker productivity fell at a 1.9 percent annual rate, the weakest pace since the fourth quarter of 2008, the Labor Department reported. A month ago it estimated that productivity, hourly output per worker, fell at a 2 percent pace.

It increased at a 3.1 percent rate in the third quarter. Economists polled by Reuters had expected the decline in productivity to be revised to a 1.6 percent rate.

The drop largely reflects a surge in hiring while output continued to expand at a slower pace. The economy added about 600,000 jobs in the fourth quarter, but gross domestic product grew at only a 0.1 percent rate.

Article source: http://www.nytimes.com/2013/03/08/business/economy/weekly-claims-for-jobless-benefits-decline.html?partner=rss&emc=rss