First-time unemployment claims drop to 450K, the 3rd decline in 4 weeks; wholesale prices tame

Jobless claims fall, wholesale prices stay tame

WASHINGTON — Unemployment claims dropped for the third time in four weeks and wholesale inflation remained tame, adding to evidence that the economy is gradually improving.

New claims for jobless benefits fell by 3,000 to a seasonally adjusted 450,000, and the lowest level in two months, the Labor Department said Thursday.

Claims have fallen by 11 percent since mid-August, after jumping to 504,000 in the week ending Aug. 14. The decline indicates layoffs are easing, even as the pace of economic growth has slowed since earlier this year.

The four-week average of new claims, which reduces volatility, fell sharply to 464,750, down 13,500 from the previous week.

“This is a pleasant surprise,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients. “We thought last week’s drop in claims would prove temporary.”

In a separate report, the Labor Department said wholesale prices, which measure price changes before they reach the consumer, rose 0.4 percent in August after rising 0.2 percent in July.

But excluding food and energy costs, so-called “core” producer prices were relatively flat. They rose just 0.1 percent and are up 1.3 percent in the past year. That indicates the weak economy is keeping inflation in check.

Concerns about deflation grew this spring after prices declined for three straight months. July’s increase quieted most of those fears. Economists said Thursday’s report confirmed that deflation is not an immediate threat.

Also Thursday, the Commerce Department said the broadest measure of the U.S. trade deficit widened for the fourth straight quarter. The current account trade deficit grew to $123.3 billion in the April-to-June period, a 12.9 percent increase from the first quarter. A year of growth could be viewed as a healing sign for the U.S. economy as Americans slowly regain their appetite to spend.

The reports follow other data earlier this week that showed modest improvement in the economy. In August retail sales rose slightly and output at factories grew for the 12th time in 14 months.

Still, the unemployment rate is stubbornly high and there are no signs that companies are ready to add enough workers to change that.

Initial claims for jobless benefits are above levels that would signal a hiring boom. In a healthy economy, claims usually fall below 400,000.

Many analysts forecast that economic output will increase by less than 2 percent in the current quarter. That’s down from 3.7 percent in the January-to-March quarter and not fast enough to reduce the 9.6 percent unemployment rate.

The unemployment claims report covers the week that included Labor Day, and claims frequently drop in holiday-shortened weeks.

The number of people continuing to receive benefits fell by 84,000 to just below 4.5 million. But that doesn’t include several million people who are receiving unemployment aid under extended programs approved by Congress during the recession. The extended benefit rolls fell by more than a half-million to just under 5 million in the week ending Aug. 28, the latest data available.

Weekly applications for jobless benefits have fluctuated around 450,000 all year, after falling in 2009 from a peak of 651,000 in March. A spike above 500,000 last month raised worries that companies were initiating a new round of layoffs. The subsequent declines have allayed those fears.

At the same time, the economy is barely growing and hiring is slow. Businesses and other private employers added a net total of 67,000 jobs in August, the Labor Department said earlier this month.

That’s not nearly enough to keep up with population growth or reduce the ranks of the unemployed. The jobless rate edged up to 9.6 percent from 9.5 percent.

Some companies are still cutting jobs. FedEx said Thursday that it would combine its money-losing FedEx Freight division with another unit. Shipments of refrigerators and other large appliances are still weak, the company said. FedEx will close 100 facilities and cut 1,700 workers.

And the Great Atlantic & Pacific Tea Co., a supermarket chain that owns A&P and other stores, said this week that about 600 of its workers in Connecticut face layoffs when the company closes several stores in the state this fall.

Some companies are adding jobs. A General Motors official said earlier this week that the company will recall 400 union workers to its engine-building plant in Spring Hill, Tenn. About 2,000 people were laid off from the plant last year.

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AP Business Writer Daniel Wagner contributed to this report.