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Home » News » World News

Feb 04, 2010, 10.32 PM | Source: Reuters

US jobless claims rise, productivity stays high

US jobless claims rise, productivity stays high

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US jobless claims rise, productivity stays high

US jobless claims rise, productivity stays high

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US jobless claims rise, productivity stays high
The number of US workers filing for jobless benefits unexpectedly rose last week, but another big gain in productivity in the fourth quarter offered hope that companies were getting close to adding to payrolls.

Initial claims for state unemployment benefits increased 8,000 to a seasonally adjusted 480,000 in the week ended January 30, the Labor Department said on Thursday. That was above market expectations for 460,000.

In another report, the department said non-farm productivity grew at a 6.2% rate in the fourth quarter as employers ramped up output at the quickest pace in six years and kept a tight lid on costs.

Analysts had expected productivity, which measures the hourly output per worker, to rise at a 6% rate after gaining 7.2% in the third quarter.

"The big news in recent jobless data was claims moving below 500,000, though the numbers remain sticky. That suggests that any improvement in employment will be slow," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.

US stock index futures deepened losses, while Treasury debt prices added to gains. The US dollar fell to session lows versus the yen. For a graph comparing the US jobless rate and new unemployment claims, click http://graphics.thomsonreuters.com/0210/US_JCUE0210.gif

Unemployment, which is lagging the broader economic recovery, is one of President Barack Obama's toughest challenges. Unhappiness over unemployment cost Obama's Democrats a crucial Senate seat last month and threatens big losses for the party in the November congressional elections.

US Senate Democratic leaders are set to unveil a proposal on Thursday that they hope will help bring down the jobless rate.

The four-week moving average for new claims rose 11,750 to 468,750 last week, the Labor Department said. The four-week moving average, considered a better gauge of underlying trends, rose for a third week after falling for 19 weeks.

High unemployment has curtailed consumer spending, but the worst of the retrenchment appears to be done. Major retail chains reported higher January sales compared with a year earlier, when the recession was at its deepest point, and monthly job losses soared to 741,000.

The government will release its closely watched employment report for January 2010 on Friday. A Reuters survey predicted non-farm payrolls grew 5,000 after a surprise 85,000 drop in December. The unemployment rate, however, is expected to edge up to 10.1% in January from 10%.

Separately, the productivity report also offered a ray of hope. Despite the worst economic downturn since the Great Depression, productivity has grown for five straight quarters as employers slashed costs, mostly by cutting jobs.

Some analysts believe companies cannot continue to boost output without starting to hire new workers.

However, others reckon companies will hold off new hires, while gauging the strength of the economic recovery and instead opt to extend working hours and make temporary workers permanent staff.

The economy grew at a 5.7% pace in the fourth quarter, its fastest clip in six years.

Total non-farm output grew at a 7.2% rate in the final three months of 2009, the fastest rate since the third quarter of 2003, accelerating from a 2.2% pace in the third quarter.

Hours worked rose at a 1% rate in the fourth quarter, the first increase since the second quarter of 2007 and the fastest pace since the fourth quarter of 2006.

Unit labor costs, a gauge of inflation and profit pressures closely watched by the Federal Reserve, fell a steeper than expected 4.4% after declining 1.5% in the third quarter. Analysts had expected unit labor costs to fall 2.5% in the fourth quarter

Depressed unit labor costs suggest scant inflation from wages, which should help the Fed to honor its promise to keep overnight interest rates low for an extended period to nurture the recovery.

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US jobless claims rise, productivity stays high

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