- The Washington Times - Thursday, February 6, 2003

WASHINGTON, Feb. 6 (UPI) — The Labor Department said Thursday new claims for state unemployment benefits during the week ended Feb. 1 fell by 11,000 to a seasonally adjusted annual rate of 391,000.

Most economists on Wall Street were expecting first time claims to fall by 12,000 during the week.

Since reaching a high for the year back in March of last year of over 500,000, jobless claims have been hovering between 375,000 and the 400,000 levels.

The 400,000 level economists have said signals a weak job market. Generally, economists associate the 400,000 level as the dividing line between a strengthening and weakening labor market.

New claims for unemployment benefits have stayed below the 400,000 level for the past 5 weeks, suggesting the weakness in the job market may be abating.

Economists pay particular attention to the jobless claims report, often one of the first signals the economy has reached bottom.

Investors watch claims because they are an easy way to gauge the strength of the job market. The fewer people filing for unemployment benefits, the more have jobs, and that tells investors a great deal about the economy.

Nearly every job comes with an income that gives a household spending power. Spending greases the wheels of the economy and keeps it growing, so a stronger job market generates a healthier economy.

There’s a downside to it, though. Unemployment claims, and therefore the number of job seekers, can fall to such a low level that businesses have a tough time finding new workers. They might have to pay overtime wages to current staff, use higher wages to lure people from other jobs, and in general spend more on labor costs because of a shortage of workers. This leads to wage inflation, which is bad news for the stock and bond markets.

Federal Reserve officials are always on the look out for inflationary pressures.

By tracking the number of jobless claims, investors can gain a sense of how tight, or how loose, the job market is. If wage inflation threatens, it’s a good bet that interest rates will rise, bond and stock prices will fall.

The latest report from the Labor Department showed the four-week moving average of claims, considered a more reliable indicator because it eliminates week-to-week fluctuations, fell to 384,750 from 385,250 a week earlier.

The Labor Department said the number of workers drawing unemployment benefits for more than a week rose to 3.353 million from 3.295 million during the latest week for which that information is available.

The unemployment rate for workers with unemployment insurance held steady at 2.6 percent. The ratio represents people claiming benefits as a percentage of the workforce potentially eligible for these benefits.

The Labor Department also said that 51 states and territories reported declines in new claims during the week that ended Jan. 25, while 2 reported increases.

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