New claims for benefits up only 1,000, near Wall Street estimates; 4-week average lowest since '01.
March 25, 2004: 9:50 AM EST
NEW YORK (CNN/Money) - New jobless claims were little changed last week, the government said Thursday, coming in near Wall Street analysts' forecasts, but raising some expectations of a strong monthly jobs report next week.
The Labor Department said 339,000 people filed new claims for state unemployment benefits in the week ended March 20, compared with a revised 338,000 the prior week.
Economists, on average, expected 338,000 new claims last week, according to Briefing.com.
The closely watched four-week moving average of initial jobless claims, which irons out weekly fluctuations, declined for a fourth straight week, falling to 341,500 from 344,500. It was the lowest figure for average claims since 336,500 were registered in January 2001.
The lack of job growth despite other indications of an improving economy has become a major concern of economists and investors, as well as an issue in this year's presidential election. Next week's report on March payrolls and unemployment rate will therefore be closely watched.
Briefing.com's survey of analysts finds the unemployment rate is expected to remain unchanged at 5.6 percent, while the number of net new jobs is expected to rise 100,000. But many of those payroll forecasts have proven overly optimistic in recent months. February's gain of 21,000 came after forecasts of 125,000 new jobs.
Mark Vitner, economist with Wachovia Securities, said that Thursday's report is a significant sign that the employment picture could brighten soon. He is forecasting that net new jobs will post a 225,000 gain next week.
He said that will be enough to send stocks, which are down for the year, up sharply, while causing a sharp sell-off in the bond market due to expectations of higher interest rates.
"If we have a gain above 200,000 it'll change investors' outlook considerably," he said. "There is concern if we do not see stronger job growth soon, the economy will simply run out of gas. But I feel more certain that at any point in this recovery we are going to see strong job growth in the next report."
But Bill Cheney, chief economist for John Hancock Financial Services, said that he's still sticking to the more cautious 100,000 job-growth target for next week's report. He said that the latest jobless claims numbers aren't different enough from past reports that preceded disappointing monthly jobs data.
"It's only telling us one side of the story, the data on firing. It's not telling us about hiring," Cheney said. "We seem to be in a range for initial claims that would have been enough for healthy job growth. But in this cycle, it seems to not be enough."
Cheney said even if there is job growth of 200,000 in the March report, it will take a couple more months above that level to get the Federal Reserve to look at raising interest rates. But he agrees with Vitner that if there is a rise in payrolls of 200,000 in next week's report, it'll shake both stock and bond markets.
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