Jobless claims drop to lowest in 5 weeks

By Msnbc.com staff and wire

The number of people seeking unemployment benefits?fell to the lowest in five weeks, government data showed on Thursday, in a hopeful sign for the struggling job market.

The Labor Department reported that?initial claims were a seasonally adjusted?397,000 in the week ended Oct. 29, a decrease of 9,000 from the previous week's revised figure of 406,000. The 4-week moving average was 404,500, a decrease of 2,000 from the previous week's revised average of 406,500.

Applications are slowly declining and have fallen in four out of the past six weeks. That suggests layoffs are easing.

But applications need to fall consistently below 375,000 to signal sustainable job growth. They haven't been below that level since February. Applications have been above 400,000 for all but two weeks since March.

"We have breached the 400,000 level, which is usually considered a pretty notable psychological level for most investors. That said, the breach hasn't been quite significant," Travelex Global Business Payments market analys Ravu Bharadwaj told Reuters.?

In the meantime, the government reported that productivity jumped to 3.1 percent this summer, the largest increae in a year and a half, while labor costs dropped 2.4 percent. That's good news for corporate profits but not so good for workers.

"Real compensation was negative for a second quarter in row. This means income and compensation are slowing down. This is telling us without growth in income and compensation, further growth in consumption is not possible," said BNP Paribas economist Yelena Shulyatyeva.

Productivity is the amount of output per hour of work. The big jump in productivity in the third quarter reflected the fact that economy had its best quarterly growth in a year while hours worked were little changed.

The economy is growing modestly but not by enough to encourage much hiring. Last week, the government said the economy expanded at a 2.5 percent annual pace in the July-September quarter, the best quarterly growth in a year.

That's strong enough to calm fears of another recession. Still, growth would have to be nearly twice as high ? consistently ? to make a major dent in the unemployment rate, which has been stuck near 9 percent for more than two years.

The figures come a day before the government releases its October jobs report. Analysts expect employers added 100,000 net jobs, nearly the same as the 103,000 added in September. The unemployment rate is expected to stay at 9.1 percent for a fourth straight month.

Employers have added an average of only 72,000 jobs per month in the past five months. That's far below the 100,000 per month needed to keep up with population growth. And it's down from an average of 180,000 in the first four months of this year.

Federal Reserve Chairman Ben Bernanke said Wednesday that growth is likely to be "frustratingly slow," after the Fed sharply lowered its economic projections for the next two years.

The Fed now says the economy will likely expand no more than 1.7 percent for all of 2011. That's down from its June forecast of 2.7 percent to 2.9 percent. And it predicted growth of only 2.5 percent to 2.9 percent next year. In June, the Fed estimated growth of 3.3 percent to 3.7 percent in 2012.

The Fed said it doesn't expect the unemployment rate to be any lower this year. And it sees unemployment averaging 8.6 percent by the end of next year. In June, it had predicted unemployment would drop in 2012 to as low as 7.8 percent.

The Associated Press contributed to this report.

Source: http://bottomline.msnbc.msn.com/_news/2011/11/03/8613277-jobless-claims-drop-for-3rd-straight-week

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