WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting a pick-up in the labour market recovery and economic growth.
But the growth outlook was dimmed somewhat by another report on Thursday showing a widening in the trade deficit in January as imports rebounded after being held down by port disruptions.
“It’s once again supporting the thought that the economic recovery is strengthening,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York.
Initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 340,000, declining for a second straight week, the Labour Department. The drop confounded economists’ expectations for a rise to 355,000.
The four-week moving average for new claims, a better measure of labour market trends, also fell 7,000 to 348,750 - the lowest level since March 2008 - pointing to some firming in underlying labour market conditions.
Coming at a time when the economy is dealing with higher taxes and deep government spending cuts, the drop in claims is encouraging as it suggests an improvement in the pace of hiring, putting more money in consumers’ pockets.
In a separate report, the Commerce Department said the trade gap rose to $44.45 billion in January from a shortfall of $38.14 billion in December. The inflation adjusted trade deficit widened to $48.0 billion from $44.2 billion in December.
Economists said this implied trade would be a small drag on first-quarter growth.
“The sharp deterioration in trade shaves a bit from the outlook for growth in the first quarter. There are signs that domestic demand is firming, which would provide a major offset to weakness abroad,” said Diane Swonk, chief economist at Mesirow Financial in Chicago.
Stocks on Wall Street were trading slightly higher on the claims data, while prices for U.S. Treasury debt fell. The dollar weakened broadly against a basket of currencies.
The claims data has no bearing on February’s employment report, due on Friday, as it falls outside the survey period.
According to a Reuters survey of economists, employers probably added 160,000 jobs last month, a small pick-up up from January’s 157,000 count. That would just be enough to hold the jobless rate steady at 7.9 percent.
Economists say job gains of at least 250,000 per month over a sustained period are needed to significantly dent the ranks of the unemployed. Job growth averaged 200,000 in the last three months.
While layoffs have ebbed, companies are not in a hurry to step up hiring as demand remains lacklustre. Claims are tucked in the low end of a 330,000 to 375,000 range for this year.
“The slow, steady improvement in claims is a good reflection of a better business environment,” said Joseph Trevisani, chief market strategist at Worldwidemarkets in Woodcliff Lake, New Jersey. “It has taken the jobless numbers a very long time to get to the point where historically managers begin to hire.”
A third report showed planned layoffs at U.S. companies rose for the second month in a row in February as the financial sector cut the most employees in over a year.
Employers announced 55,356 planned job cuts last month, up nearly 37 percent from 40,430 in January, according to the report from consultants Challenger, Gray & Christmas, Inc.
High unemployment prompted the Federal Reserve last year to launch an open-ended bond buying program. The U.S. central bank said it would keep up the program until there was a substantial improvement in the outlook for the labour market.
In testimony to Congress last week, Fed Chairman Ben Bernanke signalled the central bank would press forward with plans to buy $85 billion in bonds per month.
The number of people still receiving benefits under regular state programs after an initial week of aid rose 3,000 to 3.1 million in the week ended February 23. The four-week moving average of so-called continuing claims was the lowest since July 2008.
Additional reporting by Doug Palmer; Editing by Neil Stempleman