/www.bloomberg.com/ By Siobhan Hughes and Carlos Torres
Washington, (Bloomberg) -- More workers lined up at unemployment offices last week than any other time this year, some of them jettisoned by companies that are increasing productivity to shore up profit.
Initial jobless claims unexpectedly rose 12,000 to 430,000 in the week ended Saturday, the Labor Department said. Productivity, a measurement of how much a worker produces in an hour, rose at a 0.8 percent annual rate from October through December, another Labor Department report said. That compared with the government's previous estimate of a 0.2 percent decline.
Productivity rose 4.8 percent last year, the most since Harry Truman was president in 1950. That lets companies earn more with fewer workers even as competition holds down prices. Tomorrow's February jobs report may show the unemployment rate rose to 5.8 percent from 5.7 percent, based on economists' median forecast.
``At the moment it still is a jobless recovery,'' said Diane Swonk, director of economics at Bank One Corp. in Chicago. Productivity is the ``silver lining helping the bottom line of companies that will eventually hire.''
In the 12 months through December, the cost of labor for each good or service produced dropped 1.9 percent, the biggest decline on record. Fourth-quarter profit increased 10.4 percent for companies in the Standard & Poor's 500 Stock Index, according to Thomson First Call.
A separate Commerce Department report today showed that factory orders rose in January by the most in six months. Many of the gains stem from companies trying to catch up after depleting inventories in the fourth quarter rather than ramping up production because of demand, economists said.
Jobless Claims
Initial jobless claims were forecast to fall to 404,000, based on the median economist forecast in a Bloomberg News poll. The less volatile four-week moving average of claims rose to 408,750, the most since December's final week.
The increase adds to evidence that the economy stumbled in February as the U.S. moved closer to war with Iraq. Manufacturing and services grew more slowly, consumer confidence sank to a nine- year low and auto sales matched the lowest pace in more than four years. Snow storms in the Northeast also forced some companies, including builders, to idle workers.
``The economy's stuck in a rut,'' said Steven Ricchiuto, chief economist at ABN Amro. ``The perception was things should have been cleared up and the economy on the verge of recovery by now, but this doesn't show that.''
Continuing Claims
The number of workers continuing to receive jobless benefits increased by 180,000 to 3.516 million in the week that ended Feb. 22, the highest since the week ended Nov. 16.
Jobs are essential for a recovery because consumer spending accounts for two-thirds of the U.S. economy. February's jobless rate will probably rise to 5.8 percent in tomorrow's report and the U.S. likely added just 10,000 jobs, down from 143,000 in January, based on estimates in a Bloomberg poll of 63 economists.
U.S. stocks fell for a third day in four after the jobless claims report. The Standard & Poor's 500 Index lost 7.8 points, or 1 percent, and the Dow Jones Industrial Average dropped 102 points, or 1.3 percent, at 4:08 p.m. in New York.
Productivity
Companies are using computers and the Internet to help them do more with less, and trend that accelerated in the late 1990s and helped the Federal Reserve keep interest rates low as economic growth sped up. While the higher than expected productivity may help companies improve profit and eventually expand, for now the trend is taking a toll on workers.
``Companies have gotten efficient and are very adept at reducing costs,'' said Joseph LaVorgna, an economist with Deutsche Bank Securities Inc. in New York. Once companies start to profit from the increased productivity, ``then you start to grow your business and get some traction in the economy.''
Economists had expected a revised 0.4 percent rate of increase in productivity, based on the median of 52 forecasts in a Bloomberg News survey. Estimates ranged from a decline of 0.4 percent to an increase of 1.5 percent. Economists had also expected a 4.1 percent rise in unit labor costs, based on the median forecast, after a previously reported 4.8 percent gain.
Labor Costs
Fourth-quarter productivity was still lower than in the previous three months, when economic growth surged and productivity rose at a 5.5 percent rate.
The cost of labor rose for each good or service produced as worker efficiency gains slowed. Unit labor costs increased at a revised 3.8 percent in the fourth quarter, the largest gain since a 4.3 percent rise in the first quarter of 2001.
U.S. factory orders in January rose the most in six months, led by more bookings for autos, business equipment and higher- priced petroleum, government figures showed.
Factory orders increased 2.1 percent for the month to $327.1 billion following a revised 0.3 percent increase in December, the Commerce Department said. Excluding transportation equipment, orders rose 1.5 percent, the biggest gain since April.
The inventory-to-sales ratio, which measures the length of time goods stay on shelves, matched a record low, prompting companies to place orders to meet demand. Any acceleration in demand will boost production and help the economy speed up later this year after a possible war with Iraq, economists said.