U.S. profits fall in fourth quarter

By Doug Palmer

WASHINGTON (Reuters) - U.S. corporate profits fell 3.3 percent in the fourth quarter of 2007, according to government data on Wednesday that also confirmed U.S. economic growth slowed to a meager annual pace of 0.6 percent in same period.

A second government report showed the number of U.S. workers filing new claims for jobless benefits fell by 9,000 last week and the number of people remaining on benefits rolls after receiving an initial week of aid also declined.

Wall Street analysts surveyed before the reports had expected only a 0.1 percent drop in corporate profits, despite a crisis in the U.S. subprime mortgage market that has hobbled U.S. economic growth.

The drop in corporate profits was the first in a year, and the Commerce Department said profits of both financial and non-financial companies fell.

The department said non-financial company labour costs rose, but were partially offset by price increases.

U.S. Treasury debt prices extended losses after stock index futures rose in response to the drop in new jobless claims. The dollar extended gains.

"With the light volume we've been having, any sort of headline is going to move (the market) sort of quickly," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. However, "anyone who thinks we're not in a recession is living under a rock. Let's just get it over with."

Profits rose just 2.6 percent for all of 2007, compared to a much-healthier 12.2 percent gain in the prior year.