Ahead of the Bell: Unemployment Benefits

AP News
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Posted: Mar 15, 2012 7:45 AM
Ahead of the Bell: Unemployment Benefits

The number of people seeking unemployment benefits likely declined last week, adding to evidence that the job market is strengthening.

Economists forecast that weekly applications dipped 4,000 last week to a seasonally adjusted 358,000, according to a survey by FactSet. The Labor Department will release the report at 8:30 a.m. Eastern time Thursday.

Applications have fallen 14 percent since October and last week were slightly above a four-year low. The four-week average, which smooths out fluctuations, remained roughly at 355,000. That's essentially unchanged from the previous week, which was also the lowest in four years.

The steady decline has coincided with the best three months of hiring in two years. From December through February, employers have added an average of 245,000 jobs per month. That's pushed down the unemployment rate to 8.3 percent, the lowest in three years. The rate fell for five straight months before holding steady in February.

When unemployment benefit applications drop consistently below 375,000, it usually signals that hiring is strong enough to lower the unemployment rate.

Better economic growth is spurring more job creation. The economy grew at an annual rate of 3 percent in the final three months of last year.

Other data suggest the recovery is gaining momentum. Consumers are more confident and have stepped up spending. Auto sales are rising. And the stock market keeps climbing _ the Dow Jones industrial average this week closed at its highest point since the last day of 2007.

The Federal Reserve is slightly more upbeat about the recovery, largely because of the surge in hiring. After its one-day meeting Tuesday, the Fed said unemployment should continue to decline gradually as the economy expands. And it noted that consumer spending and business investment have picked up.

The central bank took no further steps to aid the recovery and repeated its plan to keep short-term interest rates near zero through 2014.

One concern is that rising gas prices will force consumers to cut back on discretionary spending. That could weigh on economic growth and slow hiring. The Fed said it expects oil and gas prices to temporarily boost inflation but predicted longer-term inflation should remain stable.

Even with the improvement, the job market has a ways to go to fully recover from the Great Recession. More than 12.8 million people remain unemployed and the economy still has 5 million fewer jobs than before the downturn.

But the more robust job market has caused many so-called "discouraged workers" to start looking again. They're still unemployed, but they're back in the work force. The work force surged by 476,000 in February and almost 1 million the past two months.