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updated 3/17/2011 10:14:48 AM ET 2011-03-17T14:14:48

Fewer people applied for unemployment benefits last week, providing support for the view that there will be stronger job growth this year.

Major Market Indices

And the nation's factories produced more cars, appliances, computers and furniture last month, in a sign that manufacturing would continue to rev up the U.S. economic engine despite the growing nuclear crisis in Japan. Manufacturing output rose for the sixth straight month.

An index of U.S. economic health rose for an eight straight month in February, suggesting the U.S. economic recovery remains well positioned to withstand challenges like high unemployment and rising energy prices.

Higher energy and food prices showed up in consumer inflation, which rose 0.5 percent last month, its fastest pace in more than 1-1/2 years, the Labor Department said. But core inflation, excluding volatile food and energy, rose at a slower pace.

Story: Consumer prices rise at fastest pace in nearly two years

The Labor Department said on Thursday that new applications for unemployment insurance fell to a seasonally adjusted 385,000 last week, marking the third decline in the past four weeks.

The four-week average for claims dropped to 386,250. That was the lowest level since July 2008, providing evidence that the job market is on a more solid footing.

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Benefit applications below 425,000 signal modest job growth. But the level of applications needs to fall below 375,000 to be seen as a sign of sustained declines in the unemployment rate. Benefit applications peaked at 651,000 during the recession.

Meanwhile, the Federal Reserve said overall output at the nation's factories, mines and utilities dipped 0.1 percent last month, the first decline since October. But that reflected a sharp drop in production at gas and electric utilities because of unseasonably warm weather.

Factory production, the biggest slice of industrial activity, rose 0.4 percent.

The Conference Board's index of leading indicators rose 0.8 percent in February, following a 0.1 percent gain in the prior month, according to a report released on Thursday.

That was below forecasts for a 1 percent gain in a Reuters poll of economists. Still, the gain points to "an economic expansion that should gather momentum in the coming months," said Ataman Ozyildirim, economist at the industry-led research group.

The claims data covered the survey period for the government's closely watched employment report for March and offered more signs the labor market recovery was gaining traction. Employers added 192,000 jobs in February, the most in nine months.

"There was little surprising in the latest initial claims release, which resumed its downtrend after last week's upward correction, though continuing claims fell more sharply than expected. The report implies continued labor market improvement in early March," said economist David Sloan of IFR Economics, a unit of Thomson Reuters.

The Federal Reserve on Tuesday said the economy was on "firmer footing" with the labor market improving gradually. It also dropped a reference it had used in a statement in January to employers remaining reluctant to add to payrolls.

A Labor Department official said there were no unusual factors affecting the report.

The number of people still receiving benefits under regular state programs after an initial week of aid dropped 80,000 to 3.71 million in the week ended March 5, the lowest level since September 2008.

Economists had expected so-called continuing claims to fall to 3.75 million from a previously reported 3.77 million.

The number of people on emergency unemployment benefits declined 58,580 to 3.54 million in the week ended February 26, the latest week for which data is available. A total of 8.95 million people were claiming unemployment benefits during that period under all programs.

The Associated Press and Reuters contributed to this report.

Video: Weekly jobless claims drop


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