New U.S. unemployment claims fall to lowest in 2 months

By CHRISTOPHER S. RUGABER, AP Economics Writer

WASHINGTON (AP) - The number of newly laid-off workers seeking unemployment benefits dropped slightly last week to its lowest level in two months, a sign that employers are cutting fewer jobs.

The Labor Department said Thursday that new claims for jobless benefits fell by 3,000 to a seasonally adjusted 450,000, the third decline in four weeks. Many economists had expected an increase.

Claims have fallen by 11 percent in the past month, after jumping to 504,000 in the week ending Aug. 14. The decline indicates layoffs are easing, even as the pace of economic growth has slowed since earlier this year.

The four-week average of new claims, which reduces volatility, fell sharply to 464,750, down 13,500 from the previous week.

The report follows other data earlier this week that shows the economy is still growing, but at a slow pace. Reports on retail sales and industrial production both showed modest gains.

Still, initial claims are still above levels that would signal widespread hiring. In a healthy economy, claims usually fall below 400,000.

In a separate report, the Labor Department said wholesale prices climbed in August for the second straight month, as the cost of energy rose enough to offset a decline in food costs.

Excluding volatile food and energy costs, the core index ticked up by only 0.1 percent last month. That suggests the weak economy is keeping inflation in check.

Many analysts forecast that economic output will increase by less than 2 percent in the current quarter. That's down from 3.7 percent in the January-to-March quarter and not fast enough to reduce the unemployment rate, which is currently 9.6 percent.

The unemployment claims report covers the week that included Labor Day, and claims frequently drop in holiday-shortened weeks.

The number of people receiving benefits fell by 84,000 to just below 4.5 million. But that doesn't include several million people who are receiving unemployment aid under extended programs approved by Congress during the recession. The extended benefit rolls fell by more than a half-million to just under 5 million in the week ending Aug. 28, the latest data available.

Weekly applications for jobless benefits have fluctuated around 450,000 all year, after falling in 2009 from a peak of 651,000 in March. A spike above 500,000 last month raised worries that companies were initiating a new round of layoffs. But the subsequent declines have allayed those fears.

Still, the economy is barely growing and hiring is slow. Businesses and other private employers added a net total of 67,000 jobs in August, the Labor Department said earlier this month.

That's not nearly enough to keep up with population growth or reduce the ranks of the unemployed. The jobless rate edged up to 9.6 percent from 9.5 percent.

Some companies are still cutting jobs. FedEx said Thursday that it would combine its money-losing FedEx Freight division with another unit. Shipments of refrigerators and other large appliances are still weak, the company said. FedEx will close 100 facilities and cut 1,700 workers.

And the Great Atlantic & Pacific Tea Co., a supermarket chain that owns A&P and other stores, said this week that about 600 of its workers in Connecticut face layoffs when the company closes several stores in the state this fall.

Some companies are adding jobs. A General Motors official said earlier this week that the company will recall 400 union workers to its engine-building plant in Spring Hill, Tenn. About 2,000 people were laid off from the plant last year.

(Copyright 2010 by The Associated Press. All Rights Reserved.)