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Fewer Join Ranks Of Jobless

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AP / CBS
The number of Americans filing new claims for unemployment benefits last week fell to the lowest level in six months, another indication that the battered U.S. economy may be recovering from an extended period of weakness.

The Labor Department reported Thursday that 386,000 newly laid-off workers filed claims for jobless benefits last week, down by 17,000 from the previous week.

It was the smallest number of laid off workers filing for claims since the week ending Feb. 8, when the total was 378,000 and represented the fourth week out of the past five in which claims were below 400,000. Economists see weekly claims numbers below 400,000 as signaling an improving job market.

Labor Department analysts said that last week's massive power blackout had only a minimal impact on the claims figures. While one state reported that its claims would probably have been 2,000 to 3,000 higher if its offices had been open for the whole week, the bulk of the improvement in the claims figures came from outside the areas affected by the blackouts.

President Bush, who saw his father's re-election sunk by a "jobless" economic recovery in 1992, is insisting that the momentum provided by the latest round of tax cuts will propel the economy to a stronger growth rate soon and prompt U.S. companies to start rehiring laid off workers.

The unemployment rate hit a nine-year high of 6.4 percent in June but then edged down to 6.2 percent in July. However, the bulk of that improvement reflected the fact that 500,000 discouraged workers gave up looking for a job and left the labor market. Businesses continued trimming their payrolls in July with job losses since January totaling 486,000.

But economists are predicting that economic growth in the current July-September quarter and the final three months of this year could exceed 4 percent at an annual rate, more than double the pace of the last nine months.

If that forecast comes true, then the labor market should begin improving on a sustained, but gradual basis. Employers tend to hold off on hiring until a recovery is well underway.

But recent productivity gains have allowed companies to increase production substantially without expanding their payrolls. Many analysts believe the unemployment rate will still be around 5.7 percent when voters go to the polls in November 2004 to elect the next president.

More immediately, the jobless figures could influence pending Federal Reserve decisions on whether to adjust interest rates.

The Fed's Open Market Committee next meets on Sept. 16 to decide whether to keep the federal funds rate — the interest charged on overnight, inter-bank loans that serves as a basis for most other interest rates — at its current 1 percent level, the lowest since July 1958.

At its last meeting earlier this month, the committee did not change the discount rate and sent a signal that it wouldn't change it in the future, because the risk of deflation was greater than that of inflation.

Deflation, or a general fall in prices, occurs when the economy is very weak and can have a devastating impact as the real-world value of debts soar.

The four-week moving average for jobless claims, which helps smooth out weekly fluctuations, also showed an improvement last week, dipping to 394,250, down from 395,500 the previous week. It was the lowest point for the four-week moving average since Feb. 15.

The number of people drawing jobless benefits for more than one week rose by 41,000 last week to 3.67 million, the highest level since the end of June.

The duration of unemployment has been a striking feature of the current slowdown. So far this year, the average number of weeks unemployed people have been out of work is higher than it has been since 1983.