The Labor Department reported Thursday that the number of laid-off workers seeking jobless benefits fell by 6,000 last week to 336,000, a level that was last seen the week of Jan. 13, 2001, just before Bill Clinton relinquished the White House to George W. Bush.
In other economic news, the government said inflation at the wholesale level jumped by 0.6 percent in January, the biggest increase in three months. That reflected in part the largest jump in energy prices since last March at the start of the Iraq war. Outside of the volatile food and energy categories, the Producer Price Index rose a more moderate 0.3 percent.
"Outside of energy, very little is happening, but we're now at a point with gasoline prices approaching $2 a gallon where they're beginning to take a real bite out of consumer purchasing power," Standard & Poor's chief economist David Wyss told CBS Radio News.
Meanwhile, a closely watched indicator of future economic activity remained unchanged in February, but at a high enough level to signal more strength in the economy and job growth on the horizon, a private research group reported Thursday.
The Conference Board said that its Composite Index of Leading Economic Indicators held steady at 115.1 last month, following a downwardly revised gain of 0.4 percent in January. The report was in line with what analysts were expecting.
The indicator, which forecasts trends in the economy over the next three to six months, remains 3.3 percent above its previous peak reached in May 2002.
The third straight weekly decline in jobless benefits raised hopes that a lengthy stretch of layoffs is coming to a close, setting the stage for businesses to finally begin rehiring laid-off workers.
President Bush, under attack by Democrats for what they say is the worst jobs record since Herbert Hoover, is counting on his three rounds of tax cuts to finally start generating new jobs.
The lack of significant new hiring has become a key issue in the current presidential race. Presumptive Democratic nominee Sen. John Kerry contends Bush pursued a failed economic strategy of providing tax cuts skewed to the wealthy, which have done little to generate new employment.
Just 21,000 new jobs were created in February, as reflected by the Labor Department's survey of payrolls, as the country's job machine continued to fall badly below expectations.. The overall rate remained stable only because 392,000 Americans gave up looking for work and were no longer counted in the labor market.
Mr. Bush, who has already endured a "jobless recovery" that has lasted far longer than the one that plagued his father, is counting on the tax cuts to finally begin generating jobs at a healthy clip so that voters will feel better about their economic prospects before they go to the polls in November.
The drop of 6,000 in the number of Americans filing unemployment benefits caught analysts by surprise. They had been expecting a slight increase after two weekly declines.
The drop left the four-week moving average of claims at 344,000, the lowest level for this barometer of the labor market since Jan. 27, 2001.
The 0.6 percent January increase in the PPI, which measures price changes in goods before they reach store shelves, followed a much more moderate 0.2 percent increase in December and was the sharpest jump since a 0.7 percent rise in October.
The January jump in wholesale prices was driven by a 4.7 percent rise in energy costs, the biggest monthly increase since a 4.8 percent rise in March 2002, as the U.S.-led Iraq war was beginning. Gasoline prices rose by 14.1 percent in January while home heating oil climbed 16.8 percent.
Analysts aren't sure when crude oil prices will peak.
"Most of us think that gasoline and crude oil will peak out around now and start coming down, but with production cuts coming from OPEC and the Middle East still a mess, none of us are really sure of that forecast," said Wyss.
"You start getting up around $50 a barrel, we start getting gasoline at $2.50 instead of $2 or $3 instead of $2, people will start wishing they'd bought that Toyota Corolla instead of the Humvee," he added.
Food prices fell by 1.4 percent at the wholesale level in January, the biggest monthly drop since a 3.1 percent decline in April 2002. Big declines were recorded in the price of beef, lettuce, cauliflower, tomatoes, broccoli and spinach.
Outside of food and energy, the 0.3 percent increase in so-called core inflation was the biggest monthly rise since a 0.5 percent increase in October. The core wholesale inflation rate actually fell by 0.1 percent in December and was unchanged in November.
"We think inflation has passed its low point," said Wyss. "We're going to see at least the core inflation rate creeping up for the rest of the year, but remember, we're starting from a 40-year low. Even if it creeps up a bit, it's still pretty low"
On Wednesday, the government reported that consumer prices in February were up 0.3 percent, a slight moderation compared to the 0.5 percent increase in January.
The Federal Reserve, which left