/www.bloomberg.com/ By Carlos Torres
Washington, Oct. 24 (Bloomberg) -- Claims for jobless benefits fell more than expected last week, indicating the U.S. economy may be growing enough to limit a rise in unemployment.
``We've gone from a deteriorating labor market to one that is treading water, but we still haven't gone to one that is creating a lot of new jobs,'' said Tim McGee, chief economist at U.S. Trust Corp. in New York, a unit of Charles Schwab Corp.
Unemployment applications declined by 25,000 to 389,000 for the week ended Saturday, the Labor Department reported, even as companies such as UAL Corp. announced plans for more firings. The decline may have been exaggerated by statistical adjustments for the Columbus Day government holiday October 14, which came later than in recent years, the agency said.
Claims this month have averaged 397,000 a week, down from the September average of 425,000. The number of people collecting benefits in the week ended Oct. 12 was the lowest in six weeks, and the insured unemployment rate, which tends to track the U.S. jobless rate, fell to 2.8 percent in the week ended Oct. 12 from 2.9 percent the previous week.
Economists had expected claims to fall to 405,000 last week from a previously reported 411,000 a week earlier, based on the median of 32 forecasts in a Bloomberg News survey.
Coming a week later than in recent years, the Columbus Day holiday may have disrupted the government's accounting methods. To make the claims statistics comparable from one week to another, statisticians adjust reported numbers to take into account seasonal anomalies, such as a drop in jobless claims during a week when government offices are open one less day.
Continuing Claims
The number of workers continuing to collect unemployment benefits fell to 3.577 million during the week that ended Oct. 12 from 3.692 million the prior week. The four-week moving average of first-time claims, a less volatile indicator, fell to 404,000 from 409,500 the prior week.
The October unemployment rate will probably show an increase to 5.8 percent when the Labor Department issues its monthly report Nov. 1, based on the median of 18 forecasts in a Bloomberg News survey. The September rate was 5.6 percent.
The jobless claims report ``doesn't really suggest significant improvement at all,'' said Scott Brown, an economist at Raymond James & Associates in St. Petersburg, Florida. ``It just looks like we're in a transition phase and not in a sustainable recovery just yet.''
Stocks fell for a second day in three as investors were concerned that prices had risen higher than justified by the current profit outlook. The Dow Jones Industrial Average declined 177 points, or 2.1 percent, to close at 8317.34. The Standard & Poor's Index of 500 stocks fell 14 points, or 1.5 percent, to close at 882.50.
Treasury Notes
U.S. Treasury notes rose on expectations that economic weakness would hold inflation in check. The yield on the Treasury's 4 3/8 percent note maturing in August 2012 rose 3/4 point, pushing down its yield 11 basis points to 4.12 percent. A basis point is 0.01 percentage point.
The Labor Department said 40 states and territories reported an increase in new claims during the week that ended Oct. 12, while 12 states and territories reported a decrease. One reported no change.
UAL's United Airlines, the world's second-biggest airline, said this week it will fire 1,250 employees, or about 2 percent of its workforce, in a plan to save $100 million a year. The carrier will close reservation centers in San Francisco; Long Beach, California; and Indianapolis, and a maintenance line in Indianapolis that services Boeing 757s.
UAL's Loss
UAL last week reported its ninth consecutive quarterly loss, saying it lost $889 million, or $15.57 a share, in the third quarter. Sales declined 9 percent to $3.74 billion. The company has shed 17 percent of its workforce since the Sept. 11 attacks and had 79,900 workers as of Sept. 30.
The economy will probably expand at a 2.2 percent annual pace in the last three months of the year after growing at an expected 3.6 percent rate in the third quarter, according to this month's consensus estimate of economists surveyed by the Blue Chip Economic Indicators. The survey found that economists expect the employment rate to average 6 percent over the next six months, up from 5.6 percent in September.
Some Federal Reserve policy makers aren't overly concerned that the labor market is showing few signs of improvement.
The current expansion is starting to resemble the aftermath of the 1990-91 recession, in which the unemployment rate rose for almost a year and a half after the recovery began, said Gary Stern, president of the Fed Bank of Minneapolis, in a speech this week. That recession gave way to the longest expansion on record, he said.
``A little bit of patience is probably appropriate,'' Stern said. ``What happens in the first few months of an expansion is not necessarily a precursor of what's going to happen.''