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Thursday, August 26, 2010

Jobless Claims Fall, but Labor Market Trends Still Week

New U.S. claims for unemployment benefits fell more than expected last week but a measure of underlying labor market trends rose to a nine-month high, pointing to a subdued jobs recovery.

Initial claims for state unemployment benefits fell 31,000 to a seasonally adjusted 473,000 in the week ended Aug. 21, the Labor Department said on Thursday.

The four-week average of new claims, considered a better measure of underlying labor market trends as it irons out week-to-week volatility, rose 3,250 to 486,750, the highest since late November.

Analysts polled by Reuters had forecast initial weekly jobless claims slipping to 490,000 from the previously reported 500,000 the prior week, which was revised up to 504,000 in Thursday's report.

A Labor Department official said there were no special factors influencing the report.

"Today's number is certainly a relief but it doesn't change the fact that it's still very elevated at this point of an economic expansion as the labor market still remains very sluggish with businesses still reluctant to hire and take risk,'' said Peter Boockvar, equity strategist at Miller Tabak & Co. in New York.

U.S. stock index futures extended gains on the data, while Treasury debt prices trimmed gains. The U.S. dollar erased losses versus the yen.

Coming on the heels of data this week showing a slump in housing and weakening demand for long-lasting manufactured goods, the claims report spelled more trouble for President Barack Obama and his fellow Democrats ahead of a tough mid-term election in November.

Obama is increasingly falling out of favor with Americans frustrated with a 9.5 percent unemployment rate and the Democratic Party could lose its control of Congress.

A Reuters/Ipsos poll this week found 72 percent of respondents were very worried about joblessness, while Obama's approval rating, at 45 percent, was overtaken for the first time by a 52 percent disapproval rating.

Claims for unemployment benefits have hovered above the 400,000 to 450,000 range many analysts say is associated with sustained jobs growth and this implies unemployment will remain stubbornly high well into 2011.

The number of people still receiving benefits after an initial week of aid fell 62,000 to 4.46 million in the week ended Aug. 14 from an upwardly revised 4.52 million the prior week.

So-called continuing claims covered the survey period for August's employment report, expected to show the jobless rate ticking up to 9.6 percent. Analysts had forecast continuing claims rising to 4.50 million from a previously reported 4.48 million.

The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, edged down to 3.5 percent in the week ended Aug. 14 from 3.6 percent. The number of people on emergency benefits increased 199,493 to 4.90 million in the week ended Aug. 7

Published by Reuters