Jobless Claims Rise; 3Q Productivity Posts Surprise Gain

FILE - In this June 24, 2015, file photo, a worker washes a car at Bob's Car Wash in Roseville, Calif. The Labor Department releases third-quarter productivity data on Thursday, Nov. 5, 2015. (AP Photo/Rich Pedroncelli, File)
Rich Pedroncelli/APA worker washes a car at Bob's Car Wash in Roseville, Calif.
By Lucia Mutikani

WASHINGTON -- New U.S. applications for unemployment benefits last week recorded their largest increase in eight months, but remained at levels consistent with a fairly healthy labor market.

Other data released Thursday showed a surprise rise in productivity in the third quarter after a drop in self-employment led to overall hours worked falling for the first time in six years, restraining labor-related production costs.

Initial claims for state unemployment benefits increased 16,000 to a seasonally adjusted 276,000 for the week ended Oct. 31, the Labor Department said. It was the largest weekly increase since late February.

%VIRTUAL-pullquote-There is no evidence that there has been a pickup in involuntary job separations and we continue to expect an increase of 200,000 in private payrolls in October.%Still, last week marked the 35th straight week that claims were below the 300,000 threshold normally associated with a strong jobs market. Claims had hovered near 42-year lows for much of October.

"There is no evidence that there has been a pickup in involuntary job separations and we continue to expect an increase of 200,000 in private payrolls in October," said John Ryding, chief economist at RDQ Economics in New York.

The four-week moving average of claims, considered a better measure of labor market trends as it strips out week-to-week volatility, rose 3,500 to 262,750 last week.

Last week's claims report has no bearing on the October employment report due for release Friday. According to a Reuters survey of economists, nonfarm payrolls rose 180,000 in October, well above the average gain of 139,000 jobs for August and September. The unemployment rate is forecast at 5.1 percent.

Solid payroll gains in October could seal the case for a December interest rate increase from the Federal Reserve.

The claims report showed the number of people still receiving benefits after an initial week of aid increased 17,000 to 2.16 million in the week ended Oct. 24. The four-week moving average of continuing claims, however, fell to the lowest level since November 2000.

The trend in continuing claims suggests more long-term unemployed are finding work, consistent with a low jobless rate.

The dollar was little changed against a basket of currencies, while price for U.S. Treasuries fell. Stocks on Wall Street were trading lower.

Weak Productivity Trend

In a second report, the Labor Department said productivity, which measures hourly output per worker, increased at a 1.6 percent annual rate after advancing at an upwardly revised 3.5 percent rate in the second quarter.

Manufacturing productivity grew at its fastest pace in four years, led by the durable goods sector. Economists had expected productivity to contract at a 0.2 percent rate in the July-September quarter after expanding at a previously reported 3.3 percent pace in the second quarter.

Despite the surprise rise in the third quarter, the trend in productivity remained weak. Productivity increased only 0.4 percent from the same period last year. That was a slowdown from 0.8 percent in the second quarter.

Economists blame softer productivity on a lack of investment, which they say has led to an unprecedented fall in capital intensity.

"The nature of much tech investment these days may not be doing much to help productivity. Mobile apps that make it easier to waste time at work may be leisure enhancing, but they don't support labor productivity," said Ted Wieseman, an economist at Morgan Stanley (MS) in New York.

While weak productivity has boosted employment growth as companies hired more workers to increase output, it has contributed to stagnant wages and lowered the economy's speed limit. Persistently anemic productivity could continue to limit wage growth even as the labor market approaches full employment.

In the third quarter, hours worked declined at a 0.5 percent rate, the first drop since the third quarter of 2009. That reflected a fall in self-employment as well as adjustments to hours for nonprofit and government enterprise workers.

Unit labor costs, the price of labor per single unit of output, increased at a 1.4 percent rate in the third quarter after dropping at a 1.8 percent rate in the prior quarter. Unit labor costs rose 2 percent compared to last year.

Economists say a tightening labor market could boost productivity as employers seek to cut production-related costs.

"As qualified labor is becoming scarce and the unemployment rate has now reached a level that historically has been associated with building wage pressures, firms may be more motivated to invest in labor-saving equipment that could lead to an acceleration in output per hour," said Kevin Cummins, a senior economist at RBS in Stamford, Connecticut.

9 Numbers That'll Tell You How the Economy's Really Doing
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Jobless Claims Rise; 3Q Productivity Posts Surprise Gain
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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