Associated Press WriterWASHINGTON (AP) -- New claims for unemployment insurance dipped for the second week in a row to a level suggesting that companies may be easing layoffs as signs of an economic recovery mount.
The Labor Department reported Thursday that for the work week ending Feb. 9, new claims for jobless benefits fell by a seasonally adjusted 8,000 to 373,000, the lowest level since Jan. 19.
The week before, claims went down by 9,000.
The more stable four-week moving average of claims, which smoothes out week-to-week volatility, sank last week to 376,000. That was the lowest level since Aug. 11, when claims stood at 372,000.
At that time, economists thought the economy, which had been stuck in a yearlong slump, was beginning to show tentative signs of a revival. But the economy was dealt a considerable setback by the Sept. 11 terrorist attacks, which jolted already fragile consumer confidence, disrupted business nationwide and caused layoffs to rocket.
To prop up the economy, which slid into recession in March, the Federal Reserve slashed interest rates 11 times last year, pushing the prime lending rate -- a benchmark for many consumer and business loans -- down to its lowest level since late 1965.
The Fed last month opted to leave interest rates unchanged and cited signs of a recovery as the reason. Many economists believe the Fed's aggressive rate-cutting action will pave the way for a solid rebound in the second half of this year.
Recent economic reports suggest the worst may be over for the nation's manufacturers, which have been hardest hit by the economic slump. Manufacturing activity has edged higher and factories are seeing more demand for costly big-ticket goods.
To cope with the slowdown, companies have sharply cut production and capital spending and let workers go.
Another government report Thursday showed that businesses continue to make progress getting rid of excess inventories of unsold goods, which economists say must be done before production can be ramped up.
The Commerce Department reported that business inventories fell by 0.4 percent in December, following a 1.2 percent decline the month before.
Even if the pace of layoffs slows, the nation's unemployment rate -- now at 5.6 percent -- is likely to rise in the coming months because companies, battered by the recession, may be reluctant to quickly hire back workers.
Some economists predict the jobless rate will peak at around 6.5 percent by midyear and hold steady for awhile but won't begin falling until near year's end or the beginning of 2003.