27 December 2002, 09:15  U.S. Economy: Jobless Claims Fall as Firings Slow

By Carlos Torres and Will Edwards
Washington, (Bloomberg) -- The number of U.S. workers seeking jobless benefits declined by the most in 14 months, evidence the pace of firings may be abating as the economy struggles to recover.
``Who's left to lay off?'' said James F. Smith, director of the Kenan Institute's Center for Business Forecasting at the University of North Carolina, who is also the chief economist of the Society of Industrial and Office Realtors. ``For most people, the jobs market isn't fabulous, but it's not getting any worse.''
Initial claims for state unemployment benefits fell by 60,000 to 378,000 in the week that ended Saturday, the Labor Department said. The figures, which may be distorted by seasonal variations, have swung from a 21-month low the week ended Nov. 29 to an eight- month high the following week.
Companies may have pared payrolls enough after eliminating 1.6 million jobs since the economy entered a recession in March 2001, economists said. Computer Sciences Corp., the third-largest U.S. computer services company, is trying to cut costs by telling employees they must take vacation days in the next three months, instead of relying on more job reductions.
The economy is probably expanding at a 1.5 percent annual rate this quarter, down from a 4 percent pace from July through September, according to a Bloomberg News survey of economists. Wal- Mart Stores Inc., the world's largest retailer, lowered its December sales forecast in retailers' worst holiday season in more than three decades. The Commerce Department said Tuesday that orders for durable goods unexpectedly fell in November.
Stock, Bond Markets
U.S. stocks fell, erasing gains in the first 90 minutes after the jobless claims report, as drugmakers such as Pfizer Inc. and Pharmacia Corp. led shares lower. The Standard & Poor's 500 Index declined 2.81 points, or 0.31 percent, to close at 889.66. The Dow Jones Industrial Average lost 15.5 points, or 0.18 percent, to close at 8432.61. The Nasdaq Composite Index closed down 4.58 points, or 0.33 percent, at 1367.89.
The U.S. Treasury's benchmark 4 percent note maturing in November 2012 rose almost 1/4 point, pushing the yield down 3 basis points to 3.90 percent as investors sought the safest securities on concern that tensions with Iraq and North Korea may lead to war. A basis point is 0.01 percentage point.
Separately, an index of applications for U.S. mortgages fell last week led by a drop in refinancing, according to an industry report. The Mortgage Bankers Association of America's mortgage applications index fell 7.8 percent to 908.3 from 985.5 in the previous week. The index is still well above this year's average.
Mortgage Rates at 37-Year Low
The average rate on a 30-year fixed mortgage fell to a 37- year low this, according to Freddie Mac, the No. 2 buyer of U.S. mortgages. Historically low rates will probably keep housing strong in 2003 and help underpin economic growth. The 30-year rate declined to 5.93 percent in the week that ends tomorrow, the lowest since 1965, from 6.03 percent.
The four-week moving average of first-time jobless claims, a less volatile indicator than the weekly figure, rose to 404,500 from 402,000 the prior week. The number of workers continuing to collect unemployment benefits fell by 12,000 to 3.464 million during the week that ended Dec. 14.
Unemployment will probably average 6 percent in the first three months of 2003, matching November's eight-year high, based on a Bloomberg News survey of economists earlier this month. The rate may improve to an average of 5.8 percent by the third quarter, the survey showed.
`Neither Firing Nor Hiring'
``Businesses are neither firing nor hiring right now,'' said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania. ``We aren't going to see any significant job growth until the uncertainty about the economy and world political situation is cleared up.''
Last week's claims total was down from 438,000 the previous week and compares with an average of 404,700 so far this year. The decline was the biggest since a 73,000 drop in the week ended Oct. 6, 2001. Economists had expected claims to fall to 405,000 last week, based on the median of 23 forecasts in a Bloomberg News survey, from a previously reported 433,000 a week earlier.
``These numbers are particularly volatile in the holiday season,'' said John Shin, U.S. economist at Lehman Brothers Inc. ``Although the figure is still a positive note for the labor market, it still does not really point to any genuine resurgence on the employment front.''
The insured unemployment rate, which tends to track the U.S. jobless rate, held at 2.7 percent in the week ended Dec. 14.
The Labor Department also said that 38 states and territories reported a decrease in new claims during the week that ended Dec. 14, while 15 states and territories reported an increase.
Computer Sciences
Computer Sciences Chief Executive Van Honeycutt said last month that demand for information-technology services in North America isn't improving and corporate customers have ordered fewer add-on services. Rather than cut more jobs, the company plans to trim costs by telling employees they must take a week of their vacations between Dec. 30 and March 28.
The El Segundo, California-based computer service company fired about 200 workers under contract to United Technologies Corp. in October and cut 450 additional jobs in August in a group that manages computers for banks.

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