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Thursday, November 06, 2003

US: Jobless Down, Productivity Up

These numbers are good, surprisingly good, and on the productivity front (even though they don't quite meet up to Bloomberg's earlier 'leak') almost too good. We should keep our eyes open and await further developments. Meantime good news for those who now have work but didn't before.

The number of Americans filing first-time claims for jobless benefits took an unexpectedly sharp plunge last week, reaching a level not seen since before the economy tumbled into recession in 2001, a government report showed on Thursday. A separate report showed U.S. business productivity soared in the third quarter, suggesting little risk inflation will flare despite signs the economic recovery is on firmer ground. Initial claims for state unemployment aid fell 43,000 to 348,000 in the week to Nov. 1 from a revised 391,000 the prior week, the Labor Department (news - web sites) said. It was the lowest level since late January 2001, two months before the recession began.

Stocks were poised to open higher on the data, which suggested an improvement in corporate profits and offered hope a jobs recovery may finally be at hand. Prices for U.S. Treasury securities fell sharply, while the dollar rose. Economists had expected claims to slip to 380,000 from 386,000 -- a figure boosted by a grocery store strike in California -- initially reported for the week to Oct. 25. "The large drop in claims ... confirms that firms have begun to hire and employment has turned up," said Jade Zelnik, chief economist at RBS Greenwich Capital Markets.

A spokesman for the department said he could not account for the big drop in claims last week, but said problems with seasonal adjustment of the data could be a factor. "Every week we encourage (looking at) the four-week average. This is certainly one of those weeks," he said. The four-week average, which smoothes weekly volatility to present a clearer picture of labor-market trends, fell 10,000 to 380,000 last week, its lowest level since March 2001. Initial claims and the four-week average have been below 400,000 for five weeks. Economists see that level as a divide between an improving and deteriorating labor market.

Last week, the government reported that the U.S. economy grew at an annual rate of 7.2 percent in the third quarter, the strongest pace in nearly two decades. Despite that, the economy shed 41,000 non-farm jobs as gains in productivity enabled firms to meet increased demand for goods and services without expanding their workforce. The Labor Department said on Thursday non-farm business productivity climbed at an 8.1 percent annual rate in the third quarter, accelerating from an upwardly revised 7.0 percent gain in the prior three months.

The increase reflected a rise in output that was the strongest in over 10 years, and only a small increase in the number of hours workers put in on the job. The productivity gain pushed unit labor costs -- a gauge of potential wage pressures -- down at a 4.6 percent pace, suggesting a good quarterly performance for corporate profit. Economists polled by Reuters had forecast an 8.5 percent gain in productivity and a 4.7 percent drop in unit labor costs. Analysts say the recent productivity pace is unsustainably strong, and some said the fall in jobless claims suggested firms were finally having to hire to meet demand.
Source: Yahoo News

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