Encouraging Signal From U.S. Jobless Claims

By John S. McClenahen Are U.S. companies starting to hire again? The U.S. Labor Department reports that initial claims for unemployment insurance fell to 360,000 last week, well below both the previous week's revised figure of 392,000 and economists' generally expected mark of 395,000. "The lower level is encouraging; if sustained it likely would signal renewed hiring," says Maury Harris, chief U.S. economist at UBS Warburg LLC, New York. Yet an attention-getting increase in job creation is far from certain, he indicates. "The four-week average of these volatile claims . . . remains consistent with stalled payrolls," Harris emphasizes. The four-week moving average for the week ending Jan. 11 was 387,500, some 19,500 below its previous level. The U.S. Labor Department also reports that the Consumer Price Index (CPI), one of the three or four most-closely watched measures of inflation, rose only 0.1% in December 2002, the same as its November 2002 increase and less than the 0.2% economists generally expected. The so-called core CPI -- which does not include generally volatile price changes for food and energy -- rose just 0.1% in December after increasing 0.2% in November of last year. "The [U.S.] dollar's rebound and continued growth likely will conspire to nudge core inflation up to 2.3% this year," predicts Harris. But "even that pace is too low to spur the Fed into action [to raise short-term interest rates] any time soon," he adds.

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