"I'm
deeply
saddened"
Posted on 05/10/2004 1:52:07 AM PDT by TigerTrails
WASHINGTON : The US employment outlook brightened after the government said jobless claims dropped last week to the lowest since ’00, bolstering expectations for strong numbers in the April jobs report.
The dollar closed broadly higher on the unexpectedly rosy number and bond yields rose as markets bet the Federal Reserve will hike interest rates this summer as the economy warms.
The picture of a better jobs climate was also backed by an unexpected increase in unit labour costs in the first quarter, alongside respectable productivity growth of 3.5%.
First-time claims for state unemployment benefits shrank 25,000 to 315,000 in the week ended May 1, the Labor Department said. It was the third straight week of declines.
Wall Street analysts had forecast a slight fall in claims to 335,000 from a revised 340,000 the previous week. Grant Wilson, vice president of foreign exchange at Mellon Bank in Pittsburgh , said the jobless numbers were a good omen on the eve of the April employment report.
“We weren't expecting anything as (good) as this. It bodes well for the unemployment number tomorrow,” he said.
April non-farm payrolls, are forecast to show 173,000 new jobs last month. That would be a marked moderation from March, when 308,000 were added, but still evidence that hiring is improving.
Last week's jobless claims data will make no difference to the April report, which was drawn from a survey in mid-April. But the upbeat tone chimed with a broad sense that the outlook was bright.
“The abundance of risks to our forecast of an employment gain of 150,000 for April is to the upside,” Bank of America economist Gary Bigg told clients in a note.
In the data, in addition to lower initial jobless claims, the four-week moving average of benefit applications, which smoothens weekly fluctuations to provide a better picture of trends, retreated by 3,750 to 343,250. Also, the number of unemployed on benefit rolls after claiming an initial week of aid dropped 69,000 to 2.935m in the week ended April 24, the latest for which figures were available. This was the lowest since June ’01, in the middle of the recession, when 2.9m people were drawing unemployment insurance.
The drop points in a positive direction for the jobs market since the number had been indicating that while lay-offs had slowed, firms were not rushing to hire new workers and had been utilising greater productivity to meet rising demand.
The Labor Department said productivity rose again in the first quarter, increasing at a 3.5% annual rate, as expected. But unit labor costs turned 0.5% higher, defying market forecasts for costs to be flat.
“The rise in unit labour costs is not worrying, but it is the least good performance in a year, and the chances are that the next few quarters will see bigger increases,” said Ian Shepherdson, chief US economist at High Frequency Economics in Valhalla , New York .
Powerful productivity growth has helped companies keep a lid on compensation costs, but the pick-up in employment had been expected to signal the end of this cycle, and the Fed likely will take note of the uptick in costs.
The central bank is expected to hike interest rates for the first time in four years in the months ahead.
However, after a meeting at which it left rates at a 1958-low of 1%, it announced it would be “measured” in removing policy accommodation.
Umm, you didn't even become a statistic. Isn't that being un-American or sumptin' ;-)
That'd be an incredible misuse of a mattress.
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