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Mortgage News You Can Use U.S. productivity cools, jobless claims rise
WASHINGTON, Feb 5 (Reuters) - The output of U.S. workers per hour rose at the slowest pace in a year in the fourth quarter as hiring picked up, though the number of Americans seeking jobless benefits rose unexpectedly last week, in part because of bad weather, government reports said on Thursday. Non-farm business productivity, or worker output per hour, increased at a 2.7 percent annual rate in the final three months of the year after an upwardly revised 9.5 percent pace in the previous quarter, the Labor Department said. The advance was the slowest since a 1.5 percent gain in the final quarter of 2002 and was lower than the 3.0 percent clip expected by analysts. "With hiring slowly improving it is not surprising that productivity has come back down to more normal levels," said Joel Naroff, chief economist at Naroff economic advisors. The dollar was little changed after the reports but Treasury bond prices rose slightly. In a good sign for corporate profits, unit labor costs fell 1.3 percent, a larger drop than the 0.8 percent decline expected by analysts, after a 5.6 percent tumble in the third quarter. Productivity gains have helped businesses keep production costs low -- a plus for profits -- but can be a double-edged sword as they can dampen hiring. PAYROLLS HOPES The reports are getting close scrutiny ahead of Friday's release of the Labor Department's January report on employment. After two months of disappointing jobs growth, economists are forecasting non-farm payrolls to increase 150,000 and for the unemployment rate to stay at 5.7 percent. "Strong productivity growth is indeed seen in a long-term perspective as negative for job growth but it's short-term perspective we're looking at (for) tomorrow's numbers," said Elisabeth Denison economist at Dresdner Kleinwort Wasserstein. Economists say an improvement in the labor market is crucial for a sustained economic recovery Because of the costs of adding new employees, companies over the past two years have tended to improve technology and encourage existing workers to work harder instead of ramping up hiring.But the 9.5 percent growth in the third quarter was seen by economists as unsustainable. They expect that at some point companies would not be able to make do with existing workers leading to new hiring. The Federal Reserve is seen keeping interest rates low until that happens. For all of 2003, productivity growth was 4.2 percent, down from 4.9 percent the previous year. Productivity growth is expected to cool this year, allowing companies to hire more workers to meet rising demand. The economy grew at a 4.0 percent annual rate in the last three months of 2003. WINTER WEATHER HELPS RETAILERS, HURTS JOBS Wal-Mart Stores Inc. (WMT.N: Quote , Profile , Research ) led a batch of retailers reporting surprisingly robust January sales growth, driven by cold-weather garb as temperatures in the Northeast and Midwest dropped to near-record lows. Wal-Mart, the world's biggest retailer, said January sales at U.S. stores open at least a year rose 5.7 percent, above its forecast for 3 percent to 5 percent growth. The Labor Department said separately that initial claims for state unemployment insurance rose 17,000 to 356,000 last week from a revised 339,000 in the previous week. But a Labor Department official said inclement weather in the Midwest and Southeast had affected the numbers. The official said he could not quantify the impact but layoffs can increase during bad weather in industries like construction. Analysts were expecting claims to dip to 340,000 from the originally reported 342,000 in the week ended Jan. 24. "This was a rise on the weekly numbers that people didn't expect, but I would note that the four-week moving average which gives you more of a sense of the trend, remained stable," said Jay Bryson, global economist at Wachovia Securities. The closely watched four-week moving average, considered a more reliable gauge of labor market health because it smooths volatility, was unchanged at 345,250, where it has been for three straight weeks. Back to Original Article: Mortgage News You Can Use
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