Jobless claims fall
Labor market continues to stabilize; fourth-quarter productivity revised sharply higher.
March 7, 2002: 9:41 a.m. ET
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NEW YORK (CNN/Money) - New claims for unemployment benefits fell last week, the government said Thursday, as the U.S. labor market, battered by the first recession in a decade, continued to stabilize.
The Labor Department reported that the number of Americans filing new claims for unemployment benefits fell to 376,000 in the week ended March 1 from a revised 381,000 the prior week. Economists surveyed by Briefing.com expected 375,000 new claims last week.
"Though claims have stopped rising, they have settled in this 370,000-to-380,000 range," said Lara Rhame, economist with Brown Brothers Harriman. "That's still consistent with moderate job losses, so we may not be out of the woods yet on the employment front."
Separately, the Labor Department said U.S. productivity grew 5.2 percent in the fourth quarter, a big gain from its earlier estimate of 3.5 percent. Third-quarter growth was 1.1 percent. Economists surveyed by Briefing.com expected fourth-quarter productivity growth to be revised to 4.3 percent.
U.S. stock prices were mixed in early trading as investors watched testimony from Federal Reserve Chairman Alan Greenspan, while Treasury bond prices fell.
The labor data came a day before the government's report on February unemployment. Economists surveyed by Briefing.com expect unemployment to rise to 5.8 percent, and they expect non-farm payrolls to remain unchanged in February, which would make it the first month without job losses since July 2001.
In its jobless claims report, the Labor Department said the four-week moving average of new jobless claims, which smoothes out fluctuations in the weekly data, fell to 372,750 last week from a revised 374,000 the prior week.
And continued claims, the number of people who have been out of work for a week or more, fell to 3.4 million in the week ended Feb. 23, the latest week for which data are available, from a revised 3.47 million in the prior week.
Labor hours fell 3.8 percent in the quarter, while manufacturing hours fell a whopping 10.4 percent. The manufacturing sector has been hit hardest by a recession in the broader economy that some economists think began in March 2001.
When a business-spending boom in the late 1990s went bust, businesses were left with too many unsold goods on their shelves and too much unused equipment in factories. As a result, production shut down, manufacturing entered an 18-month recession, and nearly 1.5 million Americans lost their jobs.
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In recent months, however, businesses have worked off their excess inventories, manufacturing data have indicated the sector is finally on the mend and the labor market -- which usually worsens even as the economy recovers -- has shown signs of stabilization.
But rising unemployment, combined with a high level of consumer debt, could temper consumer spending, which makes up $6 trillion of the $9 trillion U.S. economy.
"People choose to consume based on expected earnings," Rhame said. "The unemployment data should take some of the froth off of a couple of really strong [recent] data reports."
To keep consumers spending despite all the job cuts, the Federal Reserve cut its target for short-term interest rates 11 times in 2001. But it decided at its first meeting in 2002 to leave rates alone, saying it saw hints of a recovery.
Fed Chairman Alan Greenspan, speaking before a House subcommittee on Feb. 27, said a recovery, however muted, seemed to be on the way. His testimony before the Senate Thursday was much more optimistic, reflecting a slew of recent positive data.
The Fed pays close attention to productivity because it keeps inflation pressures in check, helping the economy to grow at relatively low interest rates. For the full year 2001, productivity rose 1.9 percent, the worst performance since a 0.9 percent gain in 1995.
But productivity was relatively stable compared with other recessions, the result of quick cost-cutting by businesses, and improvements in technology in recent years.
"What it suggests is that, if you smooth through the noise in the data, we are getting increasing confirmation that something fundamentally important did happen in the latter half of the 1990s, and it gives us some confidence looking into the future," Greenspan said in his testimony.
Unit labor costs fell 2.7 percent in the fourth quarter, the biggest drop since a 2.9 percent decline in the fourth quarter of 1999. For the year, costs rose 3.8 percent, the biggest jump since a 4.3 percent rise in 1990. 
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