Jobless Data Boost Labor Market Picture; Trade Gap Narrows

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FILE - In this Feb. 15, 2015 file photo, the Space Needle towers in the background beyond a container ship anchored in Elliott Bay near downtown Seattle. The Commerce Department releases international trade data for January on Friday, March 6, 2015. (AP Photo/Elaine Thompson, File)
Elaine Thompson/AP
By Lucia Mutikani

WASHINGTON -- The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting the labor market continues to expand at a solid clip even as economic growth has stalled.

Sustained labor market strength supports views that the sharp slowdown in activity is probably temporary. A host of factors ranging from bad weather to a strong dollar has sucked momentum from the economy in the first quarter.

%VIRTUAL-pullquote-Today's report reinforces our view that labor market conditions continue to improve despite recent disappointments in a number of indicators related to GDP growth.%"Today's report reinforces our view that labor market conditions continue to improve despite recent disappointments in a number of indicators related to GDP growth," said Daniel Silver, an economist at JPMorgan (JPM) in New York.

Initial claims for state unemployment benefits dropped 20,000 to a seasonally adjusted 268,000 for the week ended March 28, the Labor Department said Thursday. That was the lowest level since January.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 14,750 to 285,500 last week.

The bullish labor market tone was also underscored by signs that more people are coming off the unemployment benefits rolls.

The number of people still receiving benefits after an initial week of aid fell 88,000 to 2.33 million in the week ended March 21, the lowest reading since December 2000.

The strong labor market should keep the Federal Reserve on track to start raising interest rates this year.

The dollar was weaker against a basket of currencies, while prices for U.S. Treasury debt fell. U.S. stocks opened higher.

Allaying Fears

While the claims data has no bearing on Friday's March employment report as it falls outside the survey period, it should help allay fears of a long-lasting moderation in growth.

Nonfarm payrolls likely increased 245,000 last month, with the unemployment rate holding steady at a more than 6½-year low of 5.5 percent, according to a Reuters survey of economists.

The economy, which has been hampered by weaker global demand and a now-settled labor dispute at the West Coast ports, as well as a strong dollar and a harsh winter, also got a boost from an unexpected rise in factory orders in February.

In a separate report, the Commerce Department said new orders for manufactured goods increased 0.2 percent, ending six straight months of declines. Orders excluding transportation rose 0.8 percent, the biggest rise in eight months.

First-quarter growth estimates range between a 0.6 percent and 1.7 percent annual pace. The economy grew at a 2.2 percent pace in the fourth quarter.

Trade Gap Narrows

The growth estimates, however, could be raised as another report from the Commerce Department showed the trade deficit narrowed 16.9 percent to $35.4 billion in February, the smallest since October 2009.

Economists had forecast the trade deficit slipping to $41.2 billion. When adjusted for inflation, the deficit narrowed to $50.8 billion in February from $54.6 billion the prior month.

But the smaller trade deficit is probably temporary given a bullish dollar and weaker global demand.

"We will be looking for imports to pick up in the coming months, as consumer spending gains some momentum in the midst of rising employment levels," said Anthony Karydakis, chief economic strategist at Miller Tabak in New York.

The West Coast ports dispute appears to have slowed the flow of imports and exports. The buoyant dollar, sluggish global demand as well as lower crude oil prices also likely impacted the trade balance in February.

In February, imports tumbled 4.4 percent to $221.7 billion, the lowest since April 2011. Imports of petroleum products were the lowest since September 2004, with the average import price for crude oil at a near six-year low.

Exports fell 1.6 percent to $186.2 billion in February, the smallest since October 2012.

Exports to Canada and Mexico -- the main U.S. trading partners -- fell in February. Exports to China tumbled 8.9 percent, while those to the European Union were unchanged.

Imports from China plunged 18.1 percent, pushing the politically sensitive U.S.-China trade deficit down 21.2 percent to $22.5 billion.

9 Numbers That'll Tell You How the Economy's Really Doing
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Jobless Data Boost Labor Market Picture; Trade Gap Narrows
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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