The number of US workers filing new claims for unemployment benefits fell last week, government data showed on Thursday, but was still at levels indicating the labor market’s contraction was yet to bottom.
However, a separate report from the Commerce Department showed the country’s trade deficit shrank in February to its smallest since November 1999, supporting the view that the drop in first-quarter gross domestic product was probably not as steep as the previous period’s 6.3% annual pace of decline.
The Labor Department also said the ranks of unemployed who have claimed more than one week of aid vaulted to yet another record in the last week of March as laid-off workers battled to find new job opportunities amid a recession that is now in its 16th month.
“The small amount of good news is that it appears as though the trend in claims over the last eight weeks has leveled off, but there is nothing here to suggest that the drop in employment is anywhere near the bottom,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh.
US stocks rallied, with the major stock indexes climbing between 2% and 3% at midday, drawing strength from surprisingly robust preliminary quarterly results from Well Fargo, which fuelled hopes that stabilization might be returning to the fragile banking sector. In contrast, US government bond prices fell sharply.
Initial claims for state unemployment insurance benefits fell to a seasonally adjusted 654,000 last week, from 674,000 the week before, the department said.
But the number of people staying on benefit rolls after drawing an initial week of aid jumped to a record 5.84 million in the week ended March 28 from 5.75 million the prior week.
That lifted the insured unemployment rate, which measures the percentage of the insured labor force who are jobless, to 4.4%, the highest since a matching rate in April 1983, from 4.3% the previous week. Continuing claims have hit record highs for 11 consecutive weeks now, underscoring the difficulties of getting new jobs in the recession.
RISING UNEMPLOYMENT A CHALLENGE
Initial claims are being closely watched for clues on when the downturn, which started in December 2007, might end.
Mounting unemployment is one of the challenges confronting the economy as it is eroding household incomes, which have already been decimated by the collapse in house and stock market prices, limiting their spending ability.
The economy lost 663,000 jobs last month, driving the unemployment rate to 8.5%, a fresh 25-year high.
While claims for unemployment benefits remain at lofty levels, recent data have shown some signs of green shoots sprouting on the battered economy’s landscape.
US TRADE GAP SHRINKS
A separate report from the Commerce Department showed the housing-led output contraction is curbing appetite for imports, helping the country’s trade gap to shrink by 28.3% in February to its smallest since November 1999.
The monthly trade gap totaled $26 billion, down more than $10 billion from the $36.2 billion deficit in January and marking a record seven consecutive months of decline. The percentage drop was the steepest since in October 1996.
Economists said the narrowing trade deficit would add to Q1 gross domestic product (GDP), although the impact would be insufficient to overcome the drag from housing, inventories and business investment.
“The narrowing trade deficit is good news as it will add to growth during the first quarter,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “With consumer spending holding up better than expected, first-quarter growth could be a lot less negative than initially feared.”
The economy’s contraction in the fourth quarter was the sharpest decline since 1982. US exports of goods and services in February rose 1.6% from January, while imports fell 5.1% to their lowest level since September 2004.
The US trade deficit with China in February shrank to $14.2 billion -- a 3-year low -- from $20.6 billion in January. The February trade deficit with Japan narrowed to $2.2 billion, -- its lowest level since December 1984 -- from $4.3 billion.
Economists said that was not a good sign for global trade.
“It essentially means that weakness in the US economy has been exported around the world. Some the weakness we see in consumer demand in the US is reflecting what’s happening in China, Japan and Western Europe, PNC Financial’s Hoffman said.
In another report, the Labor Department said US import prices rose 0.5% March, advancing for the first time in eight months, as petroleum costs increased 10.5%, their fastest pace since November 2007. (Reuters)