WASHINGTON -- The number of workers filing new applications for jobless benefits dropped to a five-month low last week, a hopeful sign for an economy trying to shift into a higher gear.
The Labor Department reported Thursday that claims for unemployment insurance declined by a seasonally adjusted 29,000 to 386,000 for the work week ending July 19. It marked the second week in a row that claims went down and the first time since the week ending Feb. 8 that claims dipped below the 400,000 level associated with a weak job market.
Although claims tend to swing widely in July, distorted by temporary automobile and textile plant closings, other figures in the report also suggested that the pace of layoffs is stabilizing, economists said. Still, the job market remains in fragile shape, they added.
The more stable, four-week moving average of jobless claims, which smooths out weekly fluctuations, fell by 5,500 last week to 419,250, the lowest level since the work week ending March 8.
The number of unemployed Americans collecting jobless benefits for more than a week declined by 24,000 to a three-month low of 3.6 million for the work week ending July 12, the most recent period for which that information was available.
'The right direction'
"The sharp drop in jobless claims just hints that less workers are losing their jobs. However, less firing is not the same as more hiring, so we're still not looking at a substantial improvement in the labor market," said Oscar Gonzalez, economist at John Hancock. "Nevertheless, anything that points us in the right direction is good news and beats the alternative."
Cautious companies -- wanting profits to improve -- are still reluctant to make big capital spending investments and increase their work forces, the biggest factors restraining the economy's ability to get back to full throttle.
On Wall Street, stocks, which earlier in the day had gotten a boost from the jobless claims news, finished lower. The Dow Jones industrial average lost 81.73 points to close at 9,112.51.
To give the economic recovery a push forward, the Federal Reserve cut a key interest rate on June 25 by one-quarter percentage point to 1 percent, a 45-year low. Economists believe the Fed will hold rates at that low level when it meets next on Aug. 12.
Federal Reserve chairman Alan Greenspan and private economists are hopeful the economic growth, which has been limping along, will pick up in the second half of the year. President Bush's fresh round of tax cuts should help out on that front, economists said.
Three members of Bush's economic team will participate in a two-day bus tour in Wisconsin and Minnesota next week to promote the president's policies.
Even if the economy picks up momentum in the second half of the year, the nation's jobless rate, now at a nine-year high of 6.4 percent, could hover in that range or creep higher in coming months, economists said. Job growth probably won't be strong enough to accommodate all the additional job seekers who would enter the market, attracted by an improved climate.
Consumers are the main force keeping the economy going.
Throughout the economic slump, low mortgage rates, a refinancing frenzy and solid appreciation in home values over the past few years have spurred consumer spending, helping to offset the potentially negative force of a stagnant job market.
However, in recent weeks, mortgage rates have climbed, slowing refinancing activity. Freddie Mac, the mortgage giant, reported Thursday that the average rate on a 30-year mortgage jumped to 5.94 percent this week, the highest level since the week ending Jan. 17. This week's rate was up from last week's 5.67 percent.
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