NEW YORK (Reuters) - New U.S. claims for unemployment benefits rose more than expected last week, government data showed on Thursday, underlining the persistent weakness in the labor market.
U.S. non-farm productivity rose faster than expected in the third quarter and unit labor costs dropped, according to a government report that still pointed to a sluggish recovery.
KEY POINTS: * Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 457,000, the Labor Department said, reversing the prior week's decline. * Analysts polled by Reuters had forecast claims rising to 443,000 from the previously reported 434,000. * The government revised the prior week's figure up to 437,000. * Productivity increased at an annual rate of 1.9 percent after shrinking at a 1.8 percent pace in the second quarter, the Labor Department said. * Analysts surveyed by Reuters had forecast productivity, a measure of hourly output per worker that is taken as an indicator of the economy's vitality or lack of it, rising at a 1.0 percent rate in the third quarter.
COMMENTS:
CARY LEAHEY, ECONOMIST, DECISION ECONOMICS, NEW YORK:
"Jobless claims reversed the decline we saw in early October. What happened in the claims figures today won't impact tomorrow's employment release. You're really just wobbling around at a level that is disappointing. To get more optimistic about the labor market, you need jobless claims numbers near 400,000.
"The increase in productivity was higher than the consensus forecast. The gain is a technical issue. The self-employed market was very weak. The big picture is that firms are trying to squeeze every ounce out of the workers they have and this is one reason they feel no need to hire. To add to the misery of the worker, the workweek isn't that long by historical standards so there are still productivity gains to be made by lengthening the workweek.
"Furthermore, compensation gains are still quite modest. Taking them at face value, relative to inflation, there have been no increases in compensation adjusted for inflation in the past year. The typical firm's labor cost bill relative to revenues continues to fall. That's great for firms' bottom line in the short run. The flip side of that is if workers don't get pay increases, how will they be able to buy what companies are making? We'd like to see workers get fatter paychecks and see a little more inflation. That means some erosion of profit margins would probably be good for the economy because it would mean fatter paychecks and more consumer spending."
SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST AT SUBODH KUMAR & ASSOCIATES IN TORONTO:
"A little bit higher than expected, but I think the key issue is in last few months they've remained relatively stubborn in the 450,000 to 500,000 range, which suggests along with the labor costs declining, that the labor market remains very tough.
"From the point of view of companies being able to retain margins and hence come up with earnings , the numbers are positive. But from the point of view of revenue growth ... there's not enough change."
ZACH PANDL, ECONOMIST, NOMURA SECURITIES INTERNATIONAL, NEW YORK:
"Almost all the claims readings this year have held in a very tight range. Last week there was an encouraging decline but unfortunately claims were not sustained at that level. This suggests the labor market is not improving as much as we hoped.
"This is a modest negative surprise in labor market developments and suggests there hasn't been that much of a change between September and October labor market conditions."
RUDY NARVAS, SENIOR ECONOMIST, SOCIETE GENERALE, NEW YORK:
"It's weaker than expected but I wouldn't read too much into it, its been a quite volatile series."
"One of the things to look at too is that continuing claims fell. While that may be a good sign we don't know if that's because people are falling off because their claims have expired, so on the surface it looks good but we don't know if that's the case."
"I think the market is pretty much sitting on its hands waiting for the payrolls to come out."
MARKET REACTION: STOCKS: U.S. stock index futures trim gains after the initial claims report. BONDS: U.S. Treasury debt prices extend gains. DOLLAR: U.S. dollar extends losses versus the yen.
