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Jobless claims dip
New claims for unemployment benefits dip again; inventories show first rise in a year.
March 14, 2002: 1:17 PM EST

NEW YORK (CNN/Money) - New jobless claims fell in the United States last week while businesses added to inventories in January for the first time in a year, the government said Thursday, signs of the early stages of a recovery from the nation's first recession in a decade.

The number of Americans filing new claims for unemployment benefits fell to 377,000 in the week ended March 9 from an upwardly revised 380,000 the prior week, the Labor Department reported. Economists surveyed by had expected 375,000 new claims.

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"We will get well into the second quarter before the job situation really starts to improve," said Robert MacIntosh, chief economist with Eaton Vance Management. "That's typical of recoveries; it takes a couple of quarters before the labor market starts to turn around."

"That's a function of companies wanting to feel confident that the economy is up and running again before they hire back," MacIntosh added. "If they do want to ramp up activities, they do it by grinding more out of existing people."

Separately, the Commerce Department reported that inventories at U.S. businesses edged up 0.2 percent in January after falling a revised 0.5 percent in December. It was the first rise in inventories since January 2001. Economists surveyed by had forecast a 0.4 percent decline.

Wall Street was not terrifically impressed by the data. U.S. stock prices rose slightly in early trading, while Treasury bond prices fell.

The slight gain in business inventories is a sign that the inventory reduction process may have bottomed out at the end of 2001. Inventories have tumbled 6 percent since January 2001, as businesses have tried to clear out the glut of unsold goods left over after the business-spending boom of the late 1990s went bust.

"[Thursday's report] is a sign that companies are in fact, to a small extent, ramping up production to get themselves restocked a bit in anticipation of recovery," MacIntosh said.

"This is one of those numbers that can kind of go either way," MacIntosh added. "It means factories are producing more than they would have been, but if sales don't show up, then they have to pay it back. There's always the chance that doesn't happen."  graphic

Federal Reserve Chairman Alan Greenspan has said numerous times that the reduction in inventories should help boost the economy as companies crank up production, as long as demand grows for the new output. Curtailed production in 2000 and 2001 led to a 19-month recession in the manufacturing sector, more than a million job cuts and, eventually, a recession in the broader economy.

To set the stage for a recovery, the Fed cut its target for short-term interest rates 11 times in 2001 in a bid to lower borrowing costs and fuel consumer spending. The Fed's efforts paid off, as consumer spending rebounded sharply after the Sept. 11 terrorist attacks, sparking growth in the economy in the fourth quarter after it shrank in the third. Thus, the economy managed to avoid a technical recession, commonly defined as two straight quarters of shrinking gross domestic product (GDP).

Calling the end of a recession

The Fed, the nation's central bank, decided to leave rates alone at its first policy meeting of 2002, and Greenspan said recently that the latest recession, which began in March 2001, according to the National Bureau of Economic Research, is over. Fed policy makers meet again on Mar. 19, and they are expected to adopt a "neutral" stance at that meeting, meaning they are less inclined to cut rates due to economic weakness, and may get set to raise rates in the future.

The NBER, which defines recessions by criteria such as employment and personal income, noted this week that recent improvement in the labor market seems to indicate "that the decline in [economic] activity that began last year may be coming to an end." Though the group likely will spend months parsing data before it declares the recession over, its acknowledgement of improvement added to a picture of an economy on the mend.

But the labor market is not yet out of the woods. In its report Thursday, the Labor Department said the four-week moving average of new jobless claims, which smoothes out fluctuations in the weekly data, rose to 374,750 last week from a revised 373,750 the prior week.

And continued claims, the number of people who have been out of work for a week or more, rose to 3.48 million in the week ended Mar. 2, the latest data available, from a revised 3.38 million in the prior week.

Separately, the Commerce Department reported that the U.S. current-account deficit -- the combined balance of a combination of goods, services, income and current transfers -- rose slightly to $98.8 billion in the fourth quarter of 2001 from a revised $98.5 billion in the third quarter. Economists surveyed by expected a current-account deficit of $101.3 billion.

For the entire year 2001, the current-account deficit fell to $417.4 billion from $444.7 billion in 2000.

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Economists watch the current-account balance because of the impact a deficit could have on the value of the dollar and foreign investment in U.S. equities.

"I've been hearing worries about it for years, but I guess I'm not worried yet," Macintosh said.

In another report, the Labor Department reported that its index of U.S. import prices fell 0.1 percent in February after rising 0.4 percent in January, due mainly to a drop in prices of non-petroleum goods. The department's export price index fell 0.2 percent in February after falling 0.1 percent in January.  graphic