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Jobless claims drop after rising for 2 weeks

People wait in line to enter a job

People wait in line to enter a job fair in New York. (Feb. 24, 2010) Credit: AP

WASHINGTON -  New claims for jobless benefits fell last week in a sign that layoffs may be easing as the economy slowly recovers. The Labor Department  also reported Thursday that labor costs fell more than expected in a worker productivity increase.

The Labor Department said that initial claims for unemployment insurance fell by 29,000 to a seasonally adjusted 469,000. That nearly matches Wall Street analysts' estimates of 470,000.

Still, the drop only partly reverses a sharp rise in claims in the previous two weeks. Those increases had raised concerns that layoffs weren't slowing as quickly as many economists hoped.

Those earlier increases also partly resulted from a backlog of claims that had built up in state agencies that closed during severe snowstorms last month.

The number of people continuing to claim benefits, meanwhile, fell more than expected to 4.5 million.

The Labor Department also reported that productivity in the final three months of last year surged at a faster pace than previously thought as labor costs fell more rapidly.

The Labor Department reported Thursday that productivity jumped at an annual rate of 6.9 percent in the fourth quarter, even better than an initial estimate of a 6.2 percent growth rate. Unit labor costs fell at a rate of 5.9 percent, a bigger drop than the 4.4 percent decline initially estimated.

The combination of rising productivity and falling labor costs bolsters company profits and helps keep inflation at bay. But it also puts American households under stress, leaving them with less income to increase consumer spending, the key ingredient to economic growth.

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