The number of Americans filing new claims for unemployment benefits fell more than expected and hit a three-month low last week -- a sign of strength in a labor market that has been hobbled by severe weather.
Initial claims for state unemployment benefits dropped 26,000 to a seasonally adjusted 323,000, the Labor Department said Thursday. That was the lowest level since November's end and the drop more than unwound the prior week's rise. Economists polled by Reuters had forecast first-time applications for jobless benefits falling to 338,000 in the week ending March 1. The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, slipped 2,000 to 336,500.
The dollar extended gains versus the yen on the data. Prices for U.S. Treasury debt were little changed. The claims data has no bearing on Friday's employment report for February as it falls outside the reference period for the survey. While unseasonably cold weather has dampened hiring in recent months, the drop in new filings for jobless benefits suggests labor market fundamentals remain strong. Nonfarm payrolls are forecast to have increased by 150,000 jobs in February, according to a Reuters survey of economists, up from the weather-depressed gains of 113,000 in January and 75,000 in December.
The claims report showed the number of people still receiving benefits after an initial week of aid fell 8,000 to 2.91 million in the week ended February 22. That was the lowest level since December. A second report from the department suggested businesses would probably need to step up hiring to maintain output, after productivity in the fourth quarter was revised down sharply. Productivity, which measures hourly output per worker, rose at a 1.8 percent annual rate instead of the previously reported 3.2 percent pace. In the third quarter, it increased at a 3.5 percent pace. Economists had expected fourth-quarter productivity would be revised down to a 2.5 percent rate. Part of the weakness in productivity reflects sluggish economic growth.
Last week, the government cut its estimate of fourth-quarter gross domestic product growth to an annual pace of 2.4 percent from the previously estimated 3.2 percent rate. For all of 2013, productivity increased 0.5 percent rather than 0.6 percent. That was the smallest gain since 1993 and compared to a 1.5 percent rise in 2012.
Unit labor costs -- a gauge of the labor-related cost for any given unit of output -- fell at a revised 0.1 percent rate in the fourth quarter, still showing weak wage-related inflation pressures in the economy. They were previously reported to have dropped at a 1.6 percent rate. Unit labor costs declined at a 2.1 percent rate in the third quarter. They were up 1.1 percent 2013, the weakest reading since 2010.
