Washington, Jan. 9 (Bloomberg) -- Claims for new unemployment benefits fell last week, evidence that companies may be firing fewer workers as U.S. economic growth begins to accelerate. Initial jobless applications fell 19,000 to 389,000 in the week that ended Saturday, the Labor Department reported. It was the second week in three that the claims were below the 400,000 mark some economists say signals a weak labor market. The U.S. unemployment rate probably held at 6 percent in December, another Labor Department report may show tomorrow, based on the average economist forecast in a Bloomberg News poll. The rate's persistence at an eight-year high helped prompt President George W. Bush this week to propose a $670 billion tax-cut plan he says will boost business investment and create jobs.
``The labor market has made an improvement from losing a lot of jobs to just sort of treading water, and that seems to be where we still are,'' said Tim McGee, chief economist at U.S. Trust Corp., a unit of Charles Schwab Corp. The economy ``has to grow faster to get some significant job growth.'' Growth may increase to a 2.5 percent annual pace this quarter from 1.5 percent in the last three months of 2002, based on the average forecasts of economists in a Bloomberg poll, and some companies are rebuilding stockpiles depleted as consumers spend more money. Wholesale inventories rose in November for the fifth time in six months, gaining 0.2 percent to $284.5 billion after falling in October, the Commerce Department reported today. General Motors Corp. Chief Executive Officer Rick Wagoner this week said the largest automaker mainly will use retirements to trim its workforce this year, one way that companies are keeping payrolls lean without more firings. Still, slumping demand is hurting some other companies, and AT&T Corp. and Alcoa Inc. said this week they'll cut a combined 11,500 jobs.
Initial Claims
The initial claims for the state jobless benefits fell to 389,000 last week from 408,000 the previous week, the Labor Department said. Claims were expected to fall to 394,000, the median of 29 forecasts in a Bloomberg News survey, from a previously reported 403,000 a week earlier. The benchmark 4 percent Treasury note due in November 2012 fell about 1 1/4 point, pushing its yield up about 15 basis points at 4:12 p.m. in New York, as new corporate debt issues sapped demand for government debt. The Dow Jones Industrial Average rose 181 points, or 2.1 percent. The number of workers continuing to collect benefits rose by 35,000 to 3.445 million during the week that ended Dec. 28 from 3.41 million the prior week. The four-week moving average of first- time claims, a less volatile indicator that smoothes out weekly differences, fell to 406,000 from 419,750 the prior week.
Extending Benefits
The moving average is little changed from the first week of January 2002, when it was 407,000, underlining that the economic recovery hasn't kept companies from dismissing workers. For all of last year, claims averaged 405,000 a week. ``The labor market is still very, very sluggish,'' said Cary Leahey, a senior economist at Deutsche Bank Securities Inc. in New York. ``Firms are basically in a funk and are unwilling to hire or add much to inventories in the near term.'' The insured unemployment rate, which tends to track the U.S. jobless rate, held at 2.7 percent in the week ended Dec. 28. The department also said 35 states and territories reported an increase in new claims in the week that ended Dec. 28, while 17 reported a decrease. One reported no change. President Bush yesterday signed legislation extending unemployment benefits an extra 13 weeks for laid-off workers who exhaust their regular 26 weeks of eligibility. His signature assures that unemployment checks will continue uninterrupted for about 800,000 people whose benefits expired Dec. 28. It will extend payments for the 1.9 million people who would otherwise run out of benefits between now and May.
Unemployment Rate
Labor Department officials said the extension would not affect either the initial claims or continuing claims data in coming weeks. The Labor Department is scheduled to release its December employment survey tomorrow. Payrolls are expected to have increased by 20,000 workers last month and the unemployment rate probably held at 6 percent, an eight-year high, according to the median estimate of economists polled by Bloomberg News. Payroll gains around 100,000 to 150,000 are needed to keep the unemployment rate from rising over time, economists say. There are other signs layoffs are abating. Employers announced plans to cut fewer jobs for a second straight month in December than a month earlier, a survey by Challenger, Gray & Christmas Inc. said last week. Businesses said they would cut 92,917 positions, down 41 percent from 157,508 in November, the survey showed. It was the lowest December total since 1999.
Wholesale Inventories
The rise in wholesale inventories the Commerce Department reported today was led by increases in automobiles and metals. The 0.2 percent gain in inventories matched the average economist forecast and came as sales rose 1.2 percent, the biggest increase in seven months, to $235.7 billion. Wholesalers account for about one-fourth of all business inventories, and retailers and factories account for the rest. Increased production by manufacturers to replenish shelves may help underpin growth in coming months. OfficeMax Inc., the No. 3 U.S. office-supply retailer, had the best holiday season in three years, helping it to keep inventories lean. The strength in demand pushed the inventory-to-sales ratio, a measure of the time goods sit unsold on store shelves, to a record- low 1.21 months' worth in November. The previous low was 1.22 in October, based on comparable Commerce Department records back to 1996. Wholesalers' stockpiles of durable goods, which include autos and metals, rose 0.3 percent in November after declining 0.1 percent the previous month. Supplies rose 2.3 percent for autos and 1.1 percent for metals. Sales of durables gained 0.7 percent after dropping 1 percent. //www.quote.bloomberg.com