Jobless Claims Plunge Last Week
 
 

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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 into stocks.


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 December.


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.


UPBEAT SURPRISE


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, 2001.


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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