Jobless Claims Near 15-Year Low; Producer Prices Fall

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Producer Prices
Gene J. Puskar/AP
By Lucia Mutikani

WASHINGTON -- The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, indicating the jobs market was on solid footing even as the economy struggles to regain momentum after abruptly slowing in the first quarter.

Other data Thursday showed that a strong dollar and lower oil prices suppressed producer inflation in April. That together with signs of modest growth early in the second quarter suggest the Federal Reserve probably won't raise interest rates until later in the year.

Initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 264,000 for the week ended May 9, the Labor Department said Thursday, within a whisker of a 15-year low reached two weeks ago.

They have been below 300,000, a threshold associated with a strengthening labor market, for 10 straight weeks. Economists polled by Reuters had forecast claims rising to 275,000.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 7,750 to 271,750 last week. That was the lowest level since April 2000.

U.S. stock index futures added to gains after the data, while prices of U.S. Treasuries edged up. The U.S. dollar extended losses against a basket of currencies.

The claims data underscored the dilemma the U.S. central bank faces. Policymakers believe the economy is poised to strengthen and the labor market appears to be tightening, but surprisingly soft growth and subdued inflation pressures are complicating their plans to lift rates.

The Fed, which has a 2 percent inflation target, has kept its key short-term interest rate near zero since December 2008.

Producer Prices Resume Downward Trend

In a separate report, the Labor Department said its producer price index for final demand fell 0.4 percent last month, declining for the third time this year. The PPI increased 0.2 percent in March.

In the 12 months through April, producer prices fell 1.3 percent, the biggest year-on-year decline since 2010, after declining 0.8 percent in March.

Economists had forecast the PPI rising 0.2 percent last month and falling 0.8 percent from a year ago.

The economy barely grew in the first quarter, held back by a range of factors, including the dollar, bad weather and port disruptions. Retail sales and manufacturing data suggest that while activity is picking up, the pace remains modest.

A drop of 0.7 percent in the index for final demand goods accounted for more than 70 percent of the decline in the PPI last month. Energy prices fell 2.9 percent after rising 1.5 percent in March. Food prices fell for a fifth straight month.

The dollar, which has gained about 11 percent against the currencies of the United States' main trading partners since June, and lower energy prices are keeping inflation subdued.

Last month, the volatile trade services component, which mostly reflects profit margins at retailers and wholesalers, fell 0.8 percent after slipping 0.2 percent in the prior month.

A key measure of underlying producer price pressures that excludes food, energy and trade services ticked up 0.1 percent after rising 0.2 percent in March.

9 Numbers That'll Tell You How the Economy's Really Doing
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Jobless Claims Near 15-Year Low; Producer Prices Fall
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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