Thursday, September 02, 2010

U.S. Jobless Claims Down Slightly

The unemployment claims survey continued to paint a sluggish picture of the economy, while productivity of U.S. workers fell in the second quarter more than previously thought.

Initial unemployment claims fell by 6,000 to 472,000 in the week ended Aug. 28, the U.S. Labor Department said. New claims for the previous week, ended Aug. 21, were revised upward to 478,000 from 473,000.

Economists had predicted filings would decline by 3,000.

Meanwhile, the U.S. Labor Department reported Thursday a 1.8% decrease in nonfarm business labour productivity from the prior quarter. This was close to expectations, as economists were looking for a 1.9% decline in second-quarter productivity.

Many economic indicators, including data on housing and employment, are pointing to a slowdown in U.S. growth. Federal Reserve officials at their last meeting Aug. 10 raised concerns about the disappointing trajectory of the recovery.

The new productivity report is weaker than initial projections a month ago. The U.S. Labor Department initially estimated productivity fell by 0.9%. First-quarter productivity rose an unrevised 3.9%.

Productivity is output per hours worked. The analysts expected such a sharp revision after the government last week lowered its sights on the economy during April through June. New data said the economy grew only 1.6% in the second quarter -- and not by 2.4% as originally projected. Economic growth in the first quarter was a solid 3.7%.

Productivity serves as an important gauge of U.S. companies' efficiency. The second-quarter drop broke a string of five straight gains. Productivity usually picks up sharply at the end of recessions and eases as businesses boost hiring or work hours to fill demand.

Hours worked, meanwhile, climbed 3.5% April through June, the largest increase since the first quarter of 2006.

A growing workweek signals employers have reached the limit of efficiency as they use existing staff to wring out as much work as they can.

However, taken together, the slowdown in output along with the increase in hours suggests companies might have to increase payrolls in order to move production forward.

Manufacturing productivity rose 4.1% in the second quarter, with an 8.4% surge in output, the data Thursday showed.

In the U.S. Labor Department's claims report Thursday, the number of continuing claims -- those drawn by workers for more than one week in the week ended Aug. 21 -- fell by 23,000 to 4,456,000 from the preceding week's revised level of 4,479,000. Continuing claims are reported with a one-week lag.

This latest data on claims come just one day before the U.S. Labor Department is due to release its employment report for August, and economists are predicting it will be a bit grim.

Unemployment in the United States currently stands at 9.5%, and that figure Friday is expected to creep up to 9.6% as U.S. employers drop another 110,000 people off the payrolls.