NEW YORK (CNN/Money) - New jobless claims fell in the United States last week, the government said Thursday, though their level still indicated weakness in the labor market following the economy's first recession in a decade.
Separate government reports showed the red-hot housing market cooled off a bit in March and the costs of paying workers grew at a slower pace in the first quarter than economists expected, further hints that the Federal Reserve could be free to leave short-term interest rates lower for longer.
The number of Americans filing new claims for unemployment benefits fell to 421,000 in the week ended April 20 from a revised 452,000 the prior week, the Labor Department reported. It was the fourth straight week that claims were above 400,000, a level pointing to a sluggish job market. Economists surveyed by Briefing.com had expected 425,000 new claims.
It's still unclear how many of the new claims were actually workers re-filing for benefits after Congress allowed an extension of benefits in March. The Labor Department has been unable to clearly separate new filers from re-filers.
"This [report] suggests strongly that the distortions caused by the provisions of the March economic stimulus package are now fading and that the underlying -- downward -- trend in claims is starting to re-emerge," said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd.
The four-week moving average of new jobless claims, which smoothes out fluctuations in the weekly data, rose to 452,500 last week from a revised 450,750 the prior week.
But continued claims, the number of people who have been out of work for a week or more, fell to 3.71 million in the week ended April 13, the latest data available, from a revised 3.81 million the prior week.
Separately, existing home sales fell 8.3 percent to an annual rate of 5.4 million units in March, the National Association of Realtors said, down from February's revised pace of 5.89 million units. Economists surveyed by Briefing.com expected sales at a rate of 5.55 million units.
"We were truly at a break-neck pace for home sales in January and February, likely the result of unseasonably mild weather, so it comes as no surprise to see sales decline to a more sustainable pace," said NAR chief economist David Lereah.
In fact, the 5.4-million-unit rate is still higher than the record 5.3-million-unit pace in 2001, and Lereah said he expects sales of 5.31 million units in 2002.
In another report, the Labor Department said its index of the cost of employment rose 0.8 percent in the first quarter after rising 1.0 percent in the fourth quarter of 2001. Economists surveyed by Briefing.com had expected a 0.9-percent gain.
The department's Employment Cost Index, which measures changes in compensation costs including wages, salaries and costs for employee benefits, rose 3.9 percent between March 2001 and March 2002.
"It is good to see a bit of a slowdown in the wage component. That will be good news for companies that are struggling to get costs under control," Elisabeth Stoegmueller, economist at Dresdner Kleinwort Wasserstein, told Reuters. "Wages have held quite high throughout the recession. It seems with the lag, it is slowly starting to come down."
U.S. stock prices fell in early trading, though Nasdaq stocks recovered later in the morning. Treasury bond prices rose.
Both the housing market and the labor market are critical to consumer spending, which is the $6.5 trillion engine driving the $9.3 trillion U.S. economy.
The labor market has weakened during a recession that likely began in March 2001, and many economists expect the unemployment rate to rise to 6.0 percent this year as businesses wait to be sure a recovery in the economy and in corporate profits is on the way.
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To keep consumers spending despite more than a million job cuts, the Fed cut its target for short-term interest rates 11 times in 2001. It left rates alone at its first two policy meetings in 2002, and recent data pointing to a sluggish recovery have convinced most economists it will wait until at least June and possibly even August before beginning to raise rates again.
To put things in perspective, however, March's 5.7 percent unemployment rate is significantly lower than the 10.8 percent rate reached in 1983 or even the 7.8 percent rate reached in 1992.
And employment costs have not slowed down that much -- the 3.9 percent gain in the past 12 months was only slightly below the 4.1 percent gain between March 2000 and March 2001 or the 4.3 percent gain between March 1999 and March 2000.
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