Weekly Jobless Claims Fall, Weak Exports Push Up Trade Deficit

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By Lucia Mutikani

WASHINGTON -- The number of Americans filing new claims for unemployment benefits fell more than expected last week, in a boost to the labor market outlook and the broader economy.

Other data released Thursday showed a weakening in exports in December, which if it extends to January could see trade being a drag on growth in the first quarter after it helped to buoy the economy in the last three months of 2013.

"The underlying economic trend is still positive," said Craig Dismuke, chief economic strategist at Vining Sparks in Memphis, Tenn.

Initial claims for state unemployment benefits declined 20,000 to a seasonally adjusted 331,000, the Labor Department said. That was a bit lower than economist expectations for a fall to 335,000 in the week ended Feb. 1.

The data has no bearing on January's employment report, which will be released on Friday, as it falls outside the survey period. Still, it bodes well for the job market.

The dollar extended gains against the euro and was little changed against the yen after the claims data, while U.S. Treasury debt prices fell and stock index futures rose.

Hiring is expected to have accelerated in January after being held down by unseasonably cold weather the prior month. Nonfarm payrolls likely increased 185,000 last month, up from December's tepid 74,000 count, according to a Reuters poll of economists. The unemployment rate is forecast to hold steady at a five-year low of 6.7 percent.

That would be confirmation that the economy continued to expanded after robust growth in the second half of 2013, which was driven by consumer spending, inventory accumulation and trade.

But economy could lose some support from trade. In a separate report, %VIRTUAL-article-sponsoredlinks%the Commerce Department said the trade deficit increased 12 percent to $38.7 billion in December as exports recorded their largest decline since October 2012.

When adjusted for inflation, the trade gap rose to $49.5 billion in December from $45 billion the prior month.

The government in its first estimate of fourth-quarter GDP last week cited trade as one of the key contributors to the economy's 3.2 percent annual growth pace during the period.

Trade added 1.33 percentage points to fourth-quarter GDP growth as exports expanded at their quickest pace in three years and imports slowed. There are, however, doubts that the robust export growth pace can be sustained in light of slowing growth in markets such as China. December's fall in exports could bolster that view.

In December, exports dropped 1.8 percent to $191.3 billion. However, petroleum exports hit a record high in December. Imports edged up 0.3 percent to $230 billion in December. Imports of consumer goods hit a record high, but the impact was limited by a fall in the average price of imported crude oil, which hit its lowest level since February 2011.

The economy's solid performance in the fourth quarter was mirrored by sturdy gains in productivity.

In another report, the Labor Department said productivity rose at a 3.2 percent annual rate after increasing at a 3.6 percent pace in the third quarter. Economists polled by Reuters had forecast productivity, which measures hourly output per worker, rising at a 2.5 percent rate in the last three months of 2013.

Still, the underlying trend remained soft, with productivity increasing 1.7 percent compared to the same period in 2012. For all of 2013, productivity increased 0.6 percent. That was the smallest gain since 2011 and compared to a 1.5 percent rise in 2012.

Unit labor costs -- a gauge of the labor-related cost for any given unit of output -- fell at a 1.6 percent rate in the fourth quarter, showing weak wage-related inflation pressures in the economy. Unit labor costs fell at a 2 percent rate in the third quarter.

Economists polled by Reuters had expected unit labor costs to fall at a 0.5 percent pace in the fourth quarter. Labor costs were down 1.3 percent from the year-earlier period. They were up 1 percent in 2013, the weakest reading since 2010.

Weekly Jobless Claims Fall, Weak Exports Push Up Trade Deficit

Nationally, the average gas price hit a recent high of $3.74 per gallon, nearly $0.50 higher than it was on Jan. 1. According to website GasBuddy.com, that's about a 14 percent increase since the start of the year.

The start of the new year also marked the end of the temporary 2 percentage point tax break on Social Security contributions. Once that part of President Obama's stimulus package expired, your paychecks went back to being 2 percent smaller. For the average family, that adds up to about $1,000 a year.

That same "average family," by the way, already earns only about $50,000 a year today. And according to CNN, that's about $4,000 less than you were earning in 2000.

A disconcerting report from Sallie Mae last week showed that about one-third of Americans working toward retirement are having to raid their retirement savings to pay for their kids' college educations.

According to a poll commissioned by Bankrate.com (RATE) in February, only 55 percent of Americans have enough money tucked away in their savings accounts and "emergency funds" to cover the amounts owed on their credit cards.

That Bankrate poll also revealed that among women in particular, 51 percent actually owe more on their credit cards than they have cash in the bank. Digging deeper into the data, Bankrate reported that while high earners are doing well, and generally flush, most people (59 percent) who earn less than $30,000 annually owe more on their cards than they have in savings. And these are the people least able to afford the high cost of credit card interest.

Speaking of earnings -- and jobs -- the same unemployment report that set Wall Street to cheering Friday can be looked at from a glass half empty perspective as well. The new, lower unemployment level of 7.7 percent is the best number we've seen since the Great Recession ended. However, The Wall Street Journal points out that 7.7 percent is very close to the worst unemployment ever got (7.8 percent) in the 1991 recession. Our best number in years is within a whisker of the worst they faced back then.

The overall workforce participation rate -- the percentage of Americans currently earning wages at all -- currently stands at just 63.5 percent. According to the Bureau of Labor Statistics, that's much worse than what we saw in the 1991 recession. It's the lowest we've seen since the recession that hit during the Carter administration.

Little wonder, then, that according to the Bankrate survey, people are increasingly concerned about "job security." Friday's unemployment report may suggest that the jobs market is on the mend, but most people (59 percent) say they feel no more or less  confident in their employment situation today than they did a year ago. Among those polled whose opinions have changed, 23 percent said they feel "less secure today" than they did a year ago, versus 19 percent who feel more secure.

That doesn't exactly jibe with the story that things are getting better.

It's great news for folks who own stocks, no doubt, and according to the Journal , more than 90 percent of people earning $100,000 or more do. But what about the rest of us? Fewer than 46 percent of Americans earning less than $50,000 are invested in the stock market -- and remember, "$50,000" is the average income in America today.

So yes, It turns out for the average American, things may not be getting better at all.

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