Jobless Claims Tumble; Import Prices Surge on Food Costs

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Import Prices Rise on Surge in Food Costs
M. Spencer Green/AP
By Lucia Mutikani

WASHINGTON -- The number of Americans filing new claims for unemployment benefits fell sharply last week to the lowest level in almost seven years, which could bolster views of an acceleration in job growth after a cold winter dampened hiring.

Initial claims for state unemployment benefits dropped 32,000 to a seasonally adjusted 300,000 for the week ended April 5, the Labor Department said Thursday. That was the lowest level since May 2007, before the start of the 2007-09 recession.

"It's collaborating with the other signals we have been seeing, which is the jobs market is slowly improving. Some of the drop is normalizing from this winter's depressive effect," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pa.

U.S. stock index futures trimmed losses after the claims data. The dollar pared losses against the yen, while U.S. Treasury debt prices gave up some gains.

Economists had forecast first-time applications for jobless benefits falling to 320,000 for the week ended April 5.

Layoffs are trending lower and hiring is regaining some momentum after being held back by unusually cold weather, snow and ice storms in December and January.

Job growth averaged about 195,000 a month in February and March, with the unemployment rate holding at near a five-year low of 6.7 percent over that period.

The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, %VIRTUAL-article-sponsoredlinks%fell to 316,250 in the week ended April 5, down 4,750 from the previous week.

The claims report showed the number of people still receiving benefits after an initial week of aid fell 62,000 to 2.78 million in the week ended March 29. That was the lowest level since January 2008.

In a separate report, the Labor Department said import prices increased 0.6 percent last month after rising 0.9 percent in February.

The increase exceeded economists' expectations of a 0.2 percent rise and was driven by food prices, which recorded their largest increase in three years. Still, there was little sign of a broader pickup in imported inflation.

In the 12 months through March, import prices fell 0.6 percent, pointing to continued weak imported inflation that is helping to keep a lid on domestic price pressures.

"There is very little price pressure. In fact, inflation is too low," Sweet said.

The lack of inflation pressures in the economy suggest the Federal Reserve could keep monetary policy very accommodative for a while even as labor market slack starts to ease.

The U.S. central bank slashed overnight interest rates to a record low of zero to 0.25 percent in December 2008 and pledged to keep them low while nursing the economy back to health.

The Fed is reducing the amount of money it is pumping into the economy each month. The minutes of its March 18-19 policy meeting published Wednesday suggested it wasn't eager to start raising rates when its bond-buying program ends later this year.

Last month, import food prices jumped 3.7 percent, the biggest rise since March 2011, after falling 0.7 percent in February. Imported fuel prices rose 1.2 percent last month after advancing 5.3 percent in February.

Import prices excluding food and fuels rose 0.2 percent after slipping 0.1 percent in February.

The Labor Department report also showed export prices increased 0.8 percent in March, the largest gain since September 2012. That followed a 0.7 percent rise in February. In the 12 months through March, export prices gained 0.2 percent.

-Additional reporting by Richard Leong in New York.

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Jobless Claims Tumble; Import Prices Surge on Food Costs

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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