Jobless Claims Rise Unexpectedly

By Nancy Waitz
July 1, 2004

WASHINGTON (Reuters) - The number of Americans seeking initial jobless benefits rose unexpectedly last week, a government report showed on Thursday, but applications remained low enough to suggest layoffs have slowed and employment is picking up.

First-time claims, an early reading of the health of the job market, rose to 351,000 last week, up 1,000 from a revised 350,000 the previous week, the Labor Department said.

It was the second consecutive increase and defied Wall Street's expectations for a drop in claims to 344,000 after the originally reported 349,000 in the week ended June 19.

U.S. Treasury bond prices showed little reaction to the data, nudging lower on profit-taking after Wednesday's surge.

Overall, the U.S. labor market has been improving the past few months, but the weekly data has been fluctuating within a narrow range.

"We're quite a bit lower than last year so the level of claims suggests we will continue to see very decent gains in payroll employment, but no more than we've had in the last several months, said Kevin Logan, economist for Dresdner Kleinwort Wasserstein in New York.

"We're no longer in a period of acceleration, we're in a period of steady gains," said Logan.

Policy-makers at the Federal Reserve said on Wednesday that "output is continuing to expand at a solid pace and labor market conditions have improved." The Fed raised short-term interest rates for the first in four years, but said its monetary policy was still accommodative, with the benchmark federal funds rate at only 1.25 percent.

The closely watched four-week average, considered by many economists to be a more accurate barometer of the job market because it smoothes weekly volatility, rose for the second consecutive week to 347,000 from 344,500 in the prior week. That was well below the 419,250 in the same period a year ago.

The number of people who already qualify for a week of benefits and remain on the jobless rolls rose 13,000, the third straight rise, to 2.97 million in the week ended June 19, the latest week for which the data are available. This compares with 3.69 million for the same period a year ago.

A more comprehensive snapshot of the economy is expected on Friday when the Labor Department releases the June employment report, which is expected to show a rise to 250,000 in payroll jobs, compared with an increase last month of 248,000.



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