- The Washington Times - Thursday, January 16, 2003

WASHINGTON, Jan. 16 (UPI) — The Labor Department said Thursday that new claims for state unemployment benefits dropped to their lowest in six weeks during the latest reporting week.

The government agency said claims for state unemployment benefits during the week ended Jan. 11 sank by 32,000 to a seasonally adjusted annual rate of 360,000 — its the lowest level since Nov. 30 when filings hovered around 358,000.

Economists on Wall Street were expecting first time claims to rise by 6,000 during the week.

Since reaching a high for the year last March of more than 500,000, jobless claims have been hovering between 375,000 and the 400,000 levels. Generally, economists associate the 400,000 level as the dividing line between a strengthening and weakening labor market.

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 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 4-week moving average of claims, considered a more reliable indicator because it eliminates week-to-week fluctuations, fell to 387,500 from 407,000 during the prior week.

The Labor Department said the number of workers drawing unemployment benefits for more than a week dropped to 3.293 million during the latest week for which that information is available from 3.429 million a week earlier.

The unemployment rate for workers with unemployment insurance rose-fell to 2.6 percent from 2.7 percent a week earlier.

The ratio represents people claiming benefits as a percentage of the workforce potentially eligible for these benefits.

The Labor Department also said that 35 states and territories reported a decline in new claims in the week that ended Jan. 4, while 18 reported an increase.

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