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Jobless claims drop as labor market improves

The number of U.S. workers filing new applications for unemployment insurance fell as expected last week, resuming a downward trend that had been interrupted by the Easter holiday.
/ Source: Reuters

The number of U.S. workers filing new applications for jobless aid fell last week as the labor market gradually improves, while producer price data showed inflation remained muted, despite a surge in food prices last month.

Initial claims for state unemployment benefits dropped 24,000 to a seasonally adjusted 456,000 in the week ended April 17, the Labor Department said on Thursday. That compared to market expectations for 455,000.

The data covered the survey period for the government's closely monitored employment report for April, which will be released on May 7.

"We expect claims will continue to improve over the coming weeks," said Tom Porcelli, a senior U.S. market economist at RBC Capital Markets in New York.

In a second report, the department said the seasonally adjusted index for prices paid at the farm and factory gate increased 0.7 percent following a 0.6 percent drop in February.

Analysts polled by Reuters had expected producer prices to rise 0.4 percent in March.

U.S. stock index futures held losses after the data, while Treasury debt prices were steady. The U.S. dollar held gains versus the euro.

The department said 70 percent of the increase in wholesale prices in March was due to a 2.4 percent jump in consumer foods, the largest rise since January 1984. Gasoline prices increased 2.1 percent after a 7.4 percent fall in February.

Still, inflation pressures remain benign. Stripping out volatile food and energy costs, core producer prices rose 0.1 percent last month, after February's 0.1 percent gain. The core index had been forecast to rise 0.1 percent in March.

"Overall looking at the details it adds further evidence that price pressures are contained. It suggests that while consumer demand has rebounded, the pricing power of firms still remains limited," said Anna Piretti, a senior economist at BNP Paribas in New York.

Benign inflation
Government data last week showed consumer prices barely increased in March. A combination of benign inflation pressures and excess resource slack in the economy support the Federal Reserve's commitment to low interest rates.

The U.S. central bank is due to hold a regular two-day meeting next week and will probably renew its pledge to hold lending rates low for an extended period.

While initial claims are still above levels viewed by analysts as in line with job market stability, anecdotal evidence indicates employment is creeping up.

Last month, the economy recorded its largest jobs gain in three years, largely driven by private sector hiring as employers started to warm up to the economy's recovery -- which is showing signs of gathering momentum.

Analysts expect the hiring trend continued in April, also supported by recruitment for the 2010 census.

The number of people still receiving benefits after an initial week of aid fell 40,000 to 4.65 million in the week ended April 10, the Labor Department said. However, it was less than market expectations for a fall to 4.60 million and the prior week's figure was revised up.

The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, slipped to 3.6 percent in the week ended April 10 from 3.7 percent the prior week.