New jobless claims fall more than expected to 646K

WASHINGTON (AP) -- New jobless claims fell more than expected last week, but continuing claims set a new record for the eighth straight week and few economists expect the labor market to improve anytime soon.
The Labor Department said Thursday that initial requests for unemployment insurance dropped to a seasonally adjusted 646,000 from the previous week's revised figure of 658,000. That was better than analysts' expectations.

But continuing claims jumped 185,000 to a seasonally adjusted 5.47 million, another record-high and more than the roughly 5.33 million that economists expected.

Other economic news was slightly more upbeat. A private sector group's index of leading economic indicators dropped less than expected in February, although growth is not expected before next year. On the housing front, rates on 30-year mortgages dipped below 5 percent, and may fall further after the Federal Reserve launched a new effort to prop up that flailing market.

But on Wall Street, where the market has advanced six of the past seven sessions, stocks fell Thursday as investors scrutinized the latest Fed actions. The Dow Jones industrial average lost nearly 86 points to close at 7,400.80, and broader indicators also dropped.

The four-week average of jobless claims rose to 654,750, the highest since October 1982, when the economy was emerging from a steep recession, though the labor force has grown by about half since then.

Economists said the signs of life that have cropped up in other areas of the economy in the past week, such as upticks in retail sales and housing starts, aren't yet apparent in the labor market.

"There is no sign of even a temporary easing in the downward pressure on employment," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a client note.

Initial claims have topped 600,000 for seven straight weeks, a level that many economists say is consistent with another huge drop in net payrolls when the Labor Department issues its monthly employment report next month.

Net job losses could top 700,000 in March, Shepherdson said, which would bring total losses to above 5 million jobs since the recession began in December 2007.

Meanwhile, the New York-based Conference Board's monthly forecast of economic activity fell 0.4 percent last month, slightly better than the 0.6 percent decline economists expected. The index is designed to forecast economic activity in the next three to six months, based on 10 components that include stock prices, money supply, jobless claims and building permits.

Despite beating expectations, the index's broad decline of the past 19 months persisted and is unlikely to end until next year, economists said.

Elsewhere, government-controlled mortgage finance company Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages dropped to 4.98 percent this week, down from 5.03 percent last week. It was the lowest since the week of Jan. 15, when it was at 4.96 percent, the record low for Freddie Mac's survey that dates to 1971.

The rate quotes included in Freddie Mac's survey were taken before the Fed said Wednesday it will pump $1.2 trillion into the economy in an effort to lower rates on mortgages and other and loosen credit. That could drive mortgage rates down even further, perhaps past record lows.

But layoffs are still piling up. More job cuts were announced Thursday when FedEx Corp. said it's planning an undisclosed number of layoffs as the company reported its fiscal third-quarter profit dropped 75 percent amid severe weakness in the global economy. The Memphis, Tenn.-based company, often seen as a bellwether for the U.S. economy, also plans to scale back some workers' hours and wages.

In a separate report Thursday, the Labor Department said unemployment rose in all but one of the 372 metropolitan areas tracked by the government in January.

The job market has been hammered as employers, squeezed by reductions in consumer and business spending, cut their work forces. The unemployment rate reached 8.1 percent last month, the highest in more than 25 years. Many economists expect the rate could reach 10 percent by the end of this year.

As a proportion of the work force, the number of Americans on the jobless benefit rolls is the highest since June 1983. The 5.47 million continuing claims also were up substantially from a year ago, when only about 2.85 million people were continuing to receive unemployment checks.

The increase in continuing claims is an indication that many newly laid-off workers are having difficulty finding jobs.

And even that number is deceptively low: an additional 1.5 million people were receiving benefits under an extended unemployment compensation program approved by Congress last year. That tally was as of Feb. 28, the latest data available.

Among the states, Indiana reported the biggest increase in new claims for the week ending March 7 with a jump of more than 5,500, which it attributed to layoffs in the auto and manufacturing industries. The next largest increases were in Pennsylvania, Texas, Florida and Michigan.

The biggest drop was in New York, which had 11,218 fewer claims as a result of fewer layoffs in the service and transportation industries. Connecticut, Tennessee, California and Oregon had the next largest declines.

AP Business Writers Alan Zibel in Washington and Tali Arbel in New York contributed to this report.