Fears of mass layoffs and deflation ease as new unemployment claims continue to slow

THE ASSOCIATED PRESS
Friday, September 17th 2010, 4:00 AM

The economy may have a long way to go before it's humming again, but at least two big threats are fading.

Economists are less worried that the U.S. will experience another round of mass layoffs and its first bout of deflation since the 1930s after the release of two government reports Thursday.

The third drop in jobless claims in four weeks and a mild uptick in wholesale inflation in August added to evidence that a second recession is unlikely.

Concerns about another downturn intensified last month when jobless claims spiked past the half-million mark. Wholesale inflation - which measures price changes before products reach consumers - fell in early summer for three straight months.

But those trends have, for now, reversed themselves, leaving an economy that's growing but at a pace too slow to create many jobs.

The Labor Department said Thursday that first-time applications for unemployment benefits fell by 3,000 to a seasonally adjusted 450,000 last week, the lowest level in two months. But in a healthy economy, new claims usually fall below 400,000.

Further, the unemployment rate remains stubbornly high. In August, the city's unemployment rate was 9.4%, the same as July, but down from 10.1% in August 2009, the state Labor Department said Thursday. Nationally, the unemployment rate stood at 9.5% in August.

And some companies are still cutting workers - FedEx announced Thursday it would cut 1,700 jobs.

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