First-time jobless claims fall to lowest level since January

WASHINGTON -- Fewer people are claiming unemployment benefits -- but still too many to signal that the economy is close to gaining jobs.

First-time claims for jobless benefits dropped last week to a seasonally adjusted 502,000, the Labor Department said Thursday. That's the fewest claims since the week ending Jan. 3, and below economists' estimates.

Claims would have to fall to the high 400s to indicate the economy could soon produce even a slight gain in jobs, estimates Abiel Reinhart, an economist at JPMorgan Chase. That level of claims could be reached by January, he said, and the economy should start gaining jobs sometime in the first quarter of 2010.

Still, Reinhart doesn't expect the gains to be strong enough to push down the unemployment rate -- now at a 26-year high of 10.2 percent -- until the second quarter.

Zach Pandl, an economist at Nomura Securities, said he thinks jobless claims would need to drop to about 425,000 before jobs would be added. Pandl expects the economy to produce a net gain in jobs by January.

President Barack Obama said Thursday he'll host a White House summit next month on combating the joblessness that continues to drag on the economy.

Many private economists and Federal Reserve officials worry the nation could be in for a "jobless recovery" as the unemployment rate rises despite some overall economic growth. Companies would start hiring -- but not enough to absorb new people seeking jobs.

For now, Pandl said the weekly jobless claims figures are "showing steady progress."

"Firing activity is starting to taper off," he said.

The four-week average of unemployment claims, which smooths fluctuations, dropped to 519,750, also the lowest in almost a year.

It has fallen by more than 20 percent since its peak in the spring.

Economists closely watch initial claims as a gauge of the pace of layoffs. But claims also can provide a signal about the willingness of companies to hire, because laid-off workers able to find jobs are less likely to request benefits.

The last time the economy saw job gains was in December 2007, when employers added 120,000 jobs. Claims that month averaged about 340,000, though Reinhart said claims don't have to fall that far at the end of the recession to signal gains.

Many analysts estimate that job gains need to top 125,000 to account for population growth and lower the unemployment rate.

"We are open to any demonstrably good idea to supplement the steps we've already taken to put America back to work," Obama said before taking off for a trip to Asia. With millions of unemployed Americans, Obama said the government has "an obligation to consider every additional responsible step we can" to get people back to work.

The December jobs "forum" will bring in public and private sector experts to talk about how to get the job-creation engine running again, Obama said.

The stock market dipped in afternoon trading. The Dow Jones industrial average fell about 65 points, while broader indexes also edged down.

Employers cut a net total of 190,000 jobs in October, the government said last month, bringing total losses in the recession to 7.3 million.

Several regional Fed bank presidents warned in speeches Tuesday that the unemployment rate is likely to remain high for several years.

The economy grew at a 3.5 percent annual rate in the July-September quarter after a record four straight quarterly drops. The disparity between the unemployment rate and economic growth figure has raised fears among many economists that the nation's economy could be in for a "jobless recovery."

The government also said Thursday that the number of people continuing to claim benefits dropped by 139,000 to 5.6 million, below analysts' estimates. The figures on continuing claims lag initial claims by a week.

But millions of unemployed Americans have used up the regular 26 weeks of benefits typically provided by states and are receiving extended benefits for up to 73 additional weeks, paid for by the federal government. Congress added 14 to 20 weeks to the extended program last week, the fourth extension since the recession began and the longest total extension on record.

About 4.1 million people were receiving extended jobless benefits in the week ended Oct. 24, little changed from the previous week.