Jobless Claims Turn Higher; Productivity Up, Costs Down

Published: Thursday, 4 Nov 2010 | 8:37 AM ET
By: Reuters

New U.S. claims for unemployment benefits rose more than expected last week, government data showed on Thursday, underlining the persistent weakness in the labor market.

Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 457,000, the Labor Department said, reversing the prior week's decline.

Analysts polled by Reuters had forecast claims rising to 443,000 from the previously reported 434,000. The government revised the prior week's figure up to 437,000.

Separately, productivity rose 1.9 percent while unit labor costs fell 0.1 percent.

The report came a day after the Federal Reserve announced it would buy an additional $600 billion worth government bonds by the middle of next year to spur the lackluster economic recovery and boost employment.

The second round of asset purchases is intended to push interest rates further down, thereby stimulating domestic demand and prevent the current low inflation environment from spiraling into a damaging bout of deflation.

The claims data has little influence on October's employment report due on Friday as it falls outside the survey period. The government is expected to report that nonfarm payrolls increased 60,000 last month, likely the first expansion since May, after dropping 95,000 in September, according to a Reuters survey.

A Labor Department official said there was nothing unusual in the claims data and described the report as fairly clean.

Last week, the four-week average of new jobless claims, considered a better measure of underlying labor market trends, rose 2,000 to 456,000.

The number of people still receiving benefits after an initial week of aid fell 42,000 to 4.34 million in the week ended Oct. 23, the lowest level since the week ending Nov. 22, 2008. The prior week's figure was revised up to 4.38 million.

Analysts polled by Reuters had forecast so-called continuing claims rising to 4.38 million from a previously reported 4.36 million.

The number of people on emergency benefits increased 198,579 to 3.98 million in the week ended Oct. 16.

Productivity Jumps

Meanwhile, non-farm productivity rose faster than expected in the third quarter and unit labor costs dropped, according to a government report on Thursday that still pointed to a sluggish recovery.

Productivity increased at an annual rate of 1.9 percent after shrinking at a 1.8 percent pace in the second quarter, the Labor Department said.

Analysts surveyed by Reuters had forecast productivity, a measure of hourly output per worker that is taken as an indicator of the economy's vitality or lack of it, rising at a 1.0 percent rate in the third quarter.

Unit labor costs, a gauge of potential inflation pressures closely watched by the Federal Reserve, fell at a 0.1 percent rate after rising a revised 1.3 percent in the second quarter.

Economists had expected unit labor costs to rise at a 0.7 percent rate in the third quarter.

The Fed announced on Wednesday it would inject an additional $600 billion into the economy through government bond purchases by the middle of next year to push interest rates further down and stimulate the sickly economy.

The economy's recovery from the longest and deepest downturn since the 1930s has suffered a setback, leaving unemployment uncomfortably high. The economy grew at a sluggish 2.0 percent annual pace in the third quarter, a touch faster than the 1.7 percent rate in the second quarter, but way below potential.

Total non-farm output grew at a 3.0 percent rate in the July-September period, the Labor Department said, accelerating from a 1.6 percent rate in the second quarter. Hours worked increased at a slower 1.1 percent rate after a 3.5 percent pace in the second quarter.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

http://www.cnbc.com/id/40004480