IE 11 is not supported. For an optimal experience visit our site on another browser.

New jobless claims rise, trade gap narrows

The number new claims for jobless benefits rose more than expected last week, but a  narrowing in the trade gap in October suggested the recovery was becoming entrenched.
Economy
In this photo made Friday, Dec. 4, 2009, James Lorentz uses a computer to apply for a job at a job center for the soon to open River City Casino in St. Louis. The tally of newly laid-off workers seeking jobless benefits increased more than expected last week.Jeff Roberson / AP
/ Source: Reuters

The number of U.S. workers filing new claims for jobless benefits rose more than expected last week, but a surprise narrowing in the trade gap in October suggested the economic recovery was becoming entrenched.

Initial claims for state unemployment insurance rose 17,000 to 474,000 last week, the Labor Department said on Thursday, after five straight weeks of declines.

Analysts polled by Reuters had forecast claims climbing but only to 460,000. A Labor Department economist said claims had been bumped up by seasonal industries laying people off and by applications that had been held back during the Thanksgiving holiday week.

A separate report from the Commerce Department showed the nation's trade deficit in October shrank 7.6 percent to $32.9 billion. Analysts had expected the gap to widen to about $36.8 billion.

"Overall we are in an environment where layoffs are abating but people who were fired are still having a difficult time in finding jobs. The trade deficit is worth a couple of tenths" for fourth-quarter economic growth, said Tom Porcelli, senior economist at RBC Capital Markets in New York.

U.S. stock index futures trimmed gains on the claims data, while the dollar fell against the euro.

The labor market, considered the missing link in the economy's recovery from the most crippling recession since the 1930s, is slowly healing. Government data last week showed employers cut a mere 11,000 jobs in November.

In sign that world trade is slowly shaking off the effects of the global financial crisis, U.S. exports of goods and services were the highest since November 2008 and imports the highest since December 2008.

Good news for Obama
The smaller-than-expected trade gap is likely to prompt analysts to raise their estimates of fourth-quarter economic growth and is good news for the Obama administration, which sees export growth as an avenue for creating jobs.

A stronger rise in imports than exports in the third quarter left a wider trade gap, which constrained economic growth in that period. The economy grew at a 2.8 percent annual rate in July-September quarter, ending four straight quarters of contraction.

Even though claims rose last week, applications for unemployment benefits have dropped from lofty levels in March.

However, they are still holding above the 400,000 level that analysts reckon will signal payrolls growth.

The four-week moving average for new claims dropped 7,750 last week to 473,750, the lowest level since September last year. The four-week moving average, considered a better gauge of underlying trends as it irons out week-to-week volatility, has declined for 14 straight weeks.

"The claims are on a good trend, and the trade number is much better than expected. It's a big plus for fourth-quarter growth forecasts. People will be marking up fourth-quarter growth forecasts after this," Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.

The number of workers still collecting benefits after an initial week of aid dropped 303,000 to 5.16 million in the week ended Nov 28, the lowest level since February.

The decline, however, was largely due to people exhausting their benefits and moving to emergency unemployment programs.

This was below market expectations for 5.44 million. The four-week moving average of continuing claims fell 123,500 to 5.42 million, the lowest since March.

The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, fell to 3.9 percent in the week ended November 28 - the lowest since February -- from 4.1 percent the previous week.