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U.S. jobless claims drop on better weather

The number of Americans lining up for an initial week of jobless benefits took an unexpectedly sharp tumble last week from a level that had been boosted by cold weather, a government report showed Thursday.
/ Source: Reuters

The number of Americans signing up for initial jobless benefits fell much more than expected last week, a government report showed on Thursday, suggesting the labor market was healing, though only slowly.

Separately, a private research firm said a gauge of the nation’s economic health pointed to a sustained recovery, although it warned that the economic path “could get bumpy” if job and income growth did not pick up.

First-time claims for state unemployment aid dropped 24,000 to 344,000 in the week ended Feb. 14, the Labor Department said. The previous week’s total was boosted by unseasonably cold weather in parts of the country.

The drop was the largest since the week ended Nov. 1 and was greater than Wall Street had expected. Markets had looked for claims to fall to 353,000 from the 363,000 originally reported for the previous week.

A rise in claims in the prior two weeks was attributed to unseasonably cold weather in the Southeast that kept construction workers at home. A department official suggested warmer weather helped fuel last week’s drop.

“I think on balance, the report is consistent with continued, moderate, but sluggish improvement in the labor market,” said Alex Beuzelin, a foreign exchange analyst at Ruesch International in Washington whose assessment was shared by many economists.

The job market has proven stubbornly weak, despite an otherwise strong economy.

The Conference Board said on Thursday its index of leading economic indicators, a gauge of future economic activity, rose 0.5 percent last month, the biggest gain since October. But it said consumer confidence could stumble if the labor market failed to strengthen.

The drop in jobless claims contributed to gains in the stock market. At midmorning, the blue chip Dow Jones industrial average was up 60 points, or 0.5 percent at 10,732. The report also pushed prices of U.S. Treasury bonds down a bit.

An upbeat outlook on earnings and the economy from Wal-Mart Stores Inc., the world’s biggest company by revenues, also boosted stocks.  Wal-Mart said bigger tax refunds and a rebounding economy should propel consumer spending.

“I’m encouraged about consumer spending, particularly driven by the higher tax refund and, eventually, from improvements in the job picture,” Wal-Mart Chief Executive Lee Scott said in a recorded message.

Where are the jobs?
Claims for unemployment benefits have been below the 400,000 level normally linked by economists to a strengthening jobs market for 20 straight weeks. But hiring has remained anemic.

Job gains have averaged just 73,000 over the last five months, well shy of the 150,000 new positions needed each month just to keep pace with growth in the labor force.

Robert Brusca, chief economist at Native American Securities in New York, said a downward trend in claims evident in the second half of last year appeared to have stalled.

“Stalling is not good because we still have so far to go,” he said.

The number of people on state unemployment rolls beyond a first week climbed by a sharp 106,000 to 3.19 million in the Feb. 7 week, the latest for which figures were available.

Economists said the increase in the ranks of the unemployed tempered the otherwise positive tone of the initial claims report. Still, so-called “continued claims” are well off the lofty levels they hit in the wake of the 2001 recession.

While lay-offs appear to have eased, the lack of hiring has confounded economists, and their job-creation forecasts have repeatedly been off the mark.

The White House has fallen victim to high expectations as well. It has back-pedaled from a report released just last week that predicted a 2.6-million job gain this year, measuring from last year’s average employment level to this year’s average.

Marc Racicot, the chairman of President George W. Bush’s re-election campaign, said on Thursday the forecast was just a goal.

The sluggish labor market has become a central issue ahead of the November presidential election.