By Glenn Somerville
WASHINGTON (Reuters) - The number of Americans filing initial claims
for jobless aid plunged last week to the lowest in more than three years,
the government said on Thursday in one of several reports underlining
a quickening economic pace.
First-time claims for state unemployment insurance fell an unexpectedly
steep 14,000 in the week ended April 3 to 328,000 -- their lowest level
since just before President Bush (news - web sites) took office -- from
342,000 the prior week, the Labor Department (news - web sites) said.
The size of the fall surprised analysts and led many to predict that
a trend toward more hiring was in place, especially after last month's
pickup in job creation.
"Clearly good news," said economist Pierre Ellis of Decision
Economics Inc. in New York. "What appears to be the resumption
of new hiring should combine with this reduction in layoffs to promote
strong employment growth."
Financial markets were buoyed by the report, with the dollar rallying
against other currencies while stocks rose.
U.S. bond prices fell as investors bet interest rates may face upward
pressure should the labor market improvement persist and shifted money
By mid-morning, the Dow Jones industrial average was up more than 30
points while the Nasdaq composite index was ahead about 14 points.
A separate report from the Commerce Department (news - web sites) showing
U.S. wholesale companies saw improved sales and added heavily to inventories
in February also implied underlying strength by suggesting companies
were gearing up to feed growing demand.
Wholesale inventories grew by a larger-than-expected 1.2 percent in
February, way above Wall Street forecasts for a 0.3 percent increase
and the biggest jump since November 1999.
Even more promising, sales by wholesalers outpaced inventory growth,
rising 1.3 percent in February. The stock-to-sales ratio, which gauges
how long it would take to deplete inventories at the current sales pace,
remained at a record low 1.17 months for a third straight month.
A third piece of information -- a survey by the Manufacturers Alliance/MAPI
of business conditions including shipments, inventories and profits
-- pointed to an upsurge in the key sector.
The group said its business outlook index rose to 78 in March, the highest
in the survey's 32-year history, from the prior record high of 77 in
It also said it saw prospects for more hiring by the second quarter
-- a heartening sign for a sector that has been hard-hit by layoffs
in recent years.
The jobless claims drop far exceeded forecasts by Wall Street economists
who had predicted a dip of just 2,000. The Labor Department said last
week's level was the smallest since 320,000 in the week of Jan. 13,
Last week, the government reported a surge in new jobs during March
with 308,000 positions added to payrolls outside the farm sector, and
the jobless claims fall adds to evidence that hiring conditions may
be improving after a long drought.
The jobs market has been a hot issue in the campaign for November's
U.S. presidential elections, with Democrats highlighting the net loss
of jobs since Bush took office while administration officials maintain
an economic upswing will soon give rise to job growth.
U.S. corporate profits have been rising and analysts said the latest
claims figures implied businesses are growing confident enough about
the outlook to retain or add to staff, a positive development for the
consumer-led U.S. economy.
"It suggests that the economy is strong and that companies are
feeling more comfortable about hanging on to workers," said economist
Gary Thayer of A. G. Edwards and Sons Inc. in St. Louis, Mo.
The apparent pickup in employment may also hasten an end to a long
era of low interest rates, in which the Fed cut its key lending rate
for overnight loans between banks to a 1958 low since the start of 2001.
The central bank has regularly cited its concern about slack labor
markets as a reason for keeping rates low, though recent jobs data suggest
the slack is starting to be taken up.
The Labor Department's four-week moving average of new claims, which
irons out weekly fluctuations, declined 3,250 last week to 336,750 --
the lowest since 335,750 in the week of Nov. 25, 2000.
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