July 24 (Bloomberg) -- First-time filings for jobless benefits fell below 400,000 for the first time since early February, a government report showed, suggesting the pace of job cuts may be easing. Initial jobless claims declined by 29,000 to 386,000 in the week that ended Saturday, the Labor Department said in Washington. Economists say weekly claims of less than 400,000 signal labor market strengthening. The four-week moving average, a less volatile measure, dropped to 419,250, the lowest since the week ended March 8, from 424,750.
Executives surveyed by the Business Roundtable and economists polled by Bloomberg News have forecast the economy will accelerate the rest of this year, aided by $330 billion in tax cuts, rising stock prices and cheaper borrowing costs. Expectations of stronger economic growth may be prompting companies to retain workers. ``The labor market looks a touch better,'' said Bill Dudley, chief economist at Goldman, Sachs & Co. in New York, before the report. ``Manufacturing production has started to pick up, and factory surveys in the northeast part of the country are pointing toward further improvement.'' Economists had expected claims to rise to 415,000, based on the median of 37 forecasts in a Bloomberg News survey, from the 412,000 initially reported a week earlier.
Last week's claims total was the lowest since 378,000 in the week ended Feb. 8. Filings for benefits had exceeded 400,000 for 22 consecutive weeks, the longest such stretch since 1992, when the economy was recovering from a recession. The number of people continuing to collect state jobless benefits declined 24,000 in the week ended July 12 to 3.605 million, the lowest since 3.562 million in the week ended April 12. The insured employment rate, which tends to track the U.S. jobless rate, eased to 2.8 percent from 2.9 percent.
Automaker Closings
The Labor Department also said 39 states and territories reported an increase in new claims, while 14 reported a decrease. These statistics are reported with a one-week lag. Claims this month are difficult to interpret because automakers close plants in July for maintenance and retooling for new models. Employees ineligible for vacation pay may apply for unemployment benefits, which can cause applications to rise early in the month and drop as work resumes, economists said. The Labor Department's seasonal adjustment process projected a drop of 18 percent in unadjusted claims last week to reflect temporary summer plant shutdowns for maintenance, retooling and vacations, said Tom Stengle, a Labor Department spokesman. The unadjusted total fell 23 percent. ``It's not uncommon for the claims to exhibit volatility during July,'' Stengle said. ``You have to treat any one week cautiously.''
GM, Ford
Workers at most General Motors Corp. and Ford Motor Co. plants in North America returned to work last week after the annual summer shutdown. DaimlerChrysler AG's Chrysler group planned to close eight plants last week for model changeover. General Motors, the world's biggest automaker, based in Detroit, said its Fairfax, Kansas, plant will be closed until August as it prepares for the redesigned Chevrolet Malibu. Ford's Kansas City plant is closed for changeover to a new pickup truck. Ford has said it plans to cut spending on its salaried workforce by 10 percent to help meet the company's goal of saving $2.5 billion this year. While Ford hopes to get savings without firings, the company may have reduce salaried positions, Ford President Nick Scheele said in an e-mail released to the media last week.
Since the end of the last recession from March 2001 through November 2001, the economy has lost 1.2 million jobs. In the 20 months after the end of the 1990-1991 recession, which ended in March 1991, the economy had added 363,000 jobs.
`Key Risk' for Economy
`Given the normal volatility in July caused by plant shutdowns, the claims figures have the potential to surprise in either direction,'' said Joseph Abate, a senior economist at Lehman Brothers Inc. in New York, before the report. Abate said the labor market is still a ``key risk'' for the economy. Federal Reserve Governor Ben Bernanke said yesterday that further declines in the rate of inflation would most likely be felt in the labor market as weak demand keeps companies from hiring and investing. ``In a situation of insufficient aggregate demand, deflation or very low inflation might prevent the Fed from achieving full employment,'' he said in a speech in San Diego. Gross domestic product will expand at a 3.5 percent annual rate in three months that began July 1 and accelerate to 3.7 percent in the fourth quarter, based on the median forecast of 60 economists surveyed by Bloomberg News. The economy expanded at a 1.4 percent annual rate in the first quarter. Another survey showed that U.S. chief executive officers see sales increasing over the next six months and the economy growing at a faster pace than they did in April during the Iraq war.
The Business Roundtable, representing CEOs of 150 companies with combined revenue of $3.7 trillion, said in its July survey the average forecast for U.S. economic growth this year was 2.3 percent, up from 2.2 percent in April. Fewer CEOs expect unemployment to increase, the survey found.//www.bloomberg.com