New unemployment claims fall to lowest in 2 months

By Christopher S. Rugaber, AP Economics Writer

WASHINGTON — The number of newly laid-off workers seeking unemployment benefits dropped slightly last week to its lowest level in two months.

The Labor Department said Thursday that new claims for jobless benefits fell 3,000 to a seasonally adjusted 450,000, the third decline in four weeks. Many economists had expected an increase.

Other economic reports Thursday said that:

• Wholesale prices rose last month, but outside of volatile food and energy costs inflation remained tame.

• Americans' stronger appetites for imported goods, especially cars and computers, lifted the broadest measure of the U.S. trade deficit in the second quarter to its highest point since late 2008.


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New jobless claims have fallen 11% in the past month, after jumping to 504,000 in the week ending Aug. 14.

The four-week average of new claims, which reduces volatility, fell sharply to 464,750, down 13,500 from the previous week.

The report follows other data earlier this week that show the economy is still growing, but at a slow pace. Reports on retail sales and industrial production both showed modest gains.

Still, many economists forecast that economic output will increase less than 2% in the current quarter. That's down from 3.7% in the January-to-March quarter and not fast enough to reduce the unemployment rate, which is currently 9.6%.

The unemployment claims report covers the week that included the Labor Day holiday, and claims frequently drop in holiday-shortened weeks.

Initial claims are still above levels that would signal widespread hiring. In a healthy economy, claims usually fall below 400,000.

The number of people receiving benefits fell 84,000 to just below 4.5 million. But that doesn't include several million people who are receiving unemployment aid under extended programs approved by Congress during the recession. The extended benefit rolls fell by more than a half-million to just under 5 million in the week ending Aug. 28, the latest data available.

Energy boosts wholesale inflation index

The Producer Price Index rose 0.4% in August after increasing 0.2% in July, the Labor Department said. The index measures price changes on products before they reach the consumer.

But excluding food and energy costs, so-called "core" producer prices were relatively flat. They rose just 0.1% and are up 1.3% in the past year.

There has been little threat of inflation in recent quarters. The weak economy has stifled demand at every stage of the production chain. That makes it tough for producers to raise the prices they charge to retailers.

Concerns about deflation grew this spring after prices declined for three straight months. July's increase quieted most of those fears. But economists are watching prices closely to make sure they don't start falling again.

Energy costs increased by the most since January. Gasoline costs rose 7.5%. Home heating oil costs increased 7.0%. After surging in early August, energy costs declined to more normal levels by the end of the month.

Food prices fell 0.3%, mostly because of a decline in the cost of vegetables. Irish potatoes were the outlier. Their prices rose 27.2% — the most since June 2008.

Current account trade deficit highest since '08

The current account trade deficit grew to $123.3 billion in the April-to-June period, a 12.9% increase from the first quarter, the Commerce Department said. It marked the fourth straight quarter that the deficit has increased. That could be viewed as a healing sign for the U.S. economy as Americans slowly regain their appetite to spend.

The current account is the broadest measure of trade because it tracks the flow of goods and services as well as investments between the United States and other countries.

Exports did rise in the second quarter, but imports rose faster, contributing to the wider trade gap.

Exports of U.S.-made goods to other countries totaled $316.1 billion, a 3.4% rise from the first three months of the year. Industrial supplies and materials — including petroleum products and metals — factored into the gain.

Imports grew to $485.7 billion in the quarter, up 6.3% from the prior period. That reflected stronger demand for cars, computer as well as pickups in other manufactured consumer goods.

To help boost the economy and job creation, the Obama administration wants to double sales of U.S. exports in five years. It's an ambitious goal, especially given trade tensions between the United States and China, which offers a huge market to U.S. companies to sell their goods.

But the United States routinely runs massive trade deficits with China.

With the November congressional elections just two months away and Americans concerned about the economy, Treasury Secretary Timothy Geithner on Thursday ratcheted up the pressure on Beijing. He called on the country to take more aggressive steps to let its currency rise in value, a move that would aid sales of U.S. exports abroad.

Meanwhile, Japan, which has been struggling with a weak economy, has taken steps to lower the value of its currency, which should make its goods cheaper for foreign buyers.

The second quarter's current account trade figure was in line with economists' forecasts.

For all of 2009, the current account deficit shrunk to $378.4 billion, a 43.4% decline from the 2008 deficit. The sharp drop reflected the impact of the severe recession in the United States, which sapped Americans' demand for imported goods. But with the U.S. economy now growing again for roughly a year, economists believe the trade deficit will increase this year.

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