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Jobless claims shrink more than expected

New U.S. claims for unemployment benefits fell more than expected last week, government data showed on Thursday, pointing to some improvement in the labor market.
/ Source: Reuters

New claims for jobless benefits fell more than expected last week, but not enough to suggest much improvement in the distressed labor market.

Other data on Thursday showing a modest rise in a key gauge of future U.S. economic activity last month and small growth in factory activity in the country's Mid-Atlantic region also hardened views of more monetary policy easing next month.

"Both reports are in line with a sluggish recovery in the U.S. economy. For the Federal Reserve, the lack of meaningful improvements leave expectations for additional stimulus intact," said Cathy Lien, a director of currency research at GFT in New York.

Initial claims for state unemployment benefits fell 23,000 to a seasonally adjusted 452,000, the Labor Department said, but remaining perched above levels usually associated with a strong job market recovery.

The drop unwound most a jump in the prior week that took claims to a revised 475,000. Economists had expected claims to fall to 455,000 from a previously report 462,000.

Separately, the independent Conference Board's Leading Economic Index rose 0.3 percent last month after a 0.1 percent gain in August. The rise was in line with market expectations.

A third report showed the Philadelphia Federal Reserve Bank's business activity index rose to 1.0 in October from minus 0.7 in September. That was less than economists' expectations for a gain to 2.0. A reading above zero indicates expansion in the region's manufacturing.

Stocks on Wall Street were higher on upbeat corporate earnings, including Caterpillar Inc, which lifted investors' spirits. Prices for U.S. government debt hovered at lower levels, while expectations of further monetary stimulus weighed on the dollar.

The Fed is widely expected to announce a second round of asset purchases, also known as quantitative easing, at its November 2-3 meeting to keep interest rates low in an effort to combat high unemployment and boost demand.

The U.S. central bank, which cut its overnight interest rate to near zero in December 2008, has already bought $1.7 trillion worth of Treasury and mortgage-related debt.

Little progress

Last week's claims data covered the survey period for the government's October non-farm payrolls report.

"The gyrations in jobless claims have not been reliable predictors of nonfarm payrolls in recent months," said Julia Coronado, an economist at BNP Paribas in New York.

"The strongest conclusion we would draw from this report is that there do not appear to be significant changes in either direction in labor market conditions of late."

The labor market has stumbled as the economy's recovery from the most painful recession 70 years fizzled, leaving the jobless rate at an uncomfortably high 9.6 percent.

Anxiety over high unemployment is expected to cost the Democratic Party control of the U.S. House of Representative in November 2 congressional elections, with rival Republicans also predicted to make big gains in Senate.

The mid-term election is seen as a referendum on President Barack Obama's performance on the economy.

Last week, the four-week average of new jobless claims, considered a better measure of underlying labor market trends, fell 4,250 to 458,000.

Claims for jobless benefits have moved sideways for much of this year and continue to hold below a nine-month high touched in mid-August.

The number of people still receiving benefits after an initial week of aid dropped 9,000 to 4.44 million in the week ended October 9, the lowest level since the week ending June 26, from an upwardly revised 4.45 million the prior week.

Analysts polled by Reuters had forecast so-called continuing claims edging up to 4.41 million from a previously reported 4.40 million.

The number of people on emergency benefits increased 152,112 to 4.04 million in the week ended October 2.