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WRAPUP 1-U.S. jobless claims fall to lowest in 4-1/2 years

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By Doug Palmer

WASHINGTON, Oct 11 (Reuters) - The number of Americansfiling new claims for unemployment benefits fell sharply lastweek to the lowest level in more than four and a half years,according to government data on Thursday that suggestedimprovement in the labor market.

The news could help President Barack Obama in his tight racefor re-election on Nov. 6 against Republican challenger MittRomney, who says Obama has mishandled the economy.

But a second report released on Thursday hinted at weakerU.S. and global demand. The U.S. trade deficit widened in Augustto $44.2 billion, as U.S. goods exports fell for the fifthconsecutive month and imports declined fractionally.

Initial claims for state unemployment benefits fell 30,000to a seasonally adjusted 339,000, the Labor Department said.

It was the lowest number of new claims since February 2008,about a year before Obama took office in the midst of the globalfinancial crisis.

"This is a positive signal for the economy. The overalltrend seems to be that the labor market is improving," saidBrian Kim, a currency strategist at RBS Securities in Stamford,Connecticut.

A Labor Department analyst noted that seasonal factors hadpredicted a very large increase in claims last week, which hesaid would be typical for the first week of the calendarquarter. Unadjusted claims did rise, but far less than expected,resulting in the sharp drop in the seasonally adjusted figure.

The analyst cautioned against reading too much into oneweek's figure, and noted that one state had reported a declinein claims last week when an increase was expected. He said nostates had been estimated for the report.

Still, economists said the labor market was showing signs ofgetting stronger.

Zach Pandl, strategist at Columbia Management inMinneapolis, said "you do have to be cautious about possibledistortions. But with that caveat, the jobless claims numbershave been modestly encouraging over the last few weeks."

The prior week's figure was revised up to show 2,000 morenew jobless aid applications than previously reported.

Economists polled by Reuters had forecast claims edging up to370,0000 last week. The four-week moving average for new claims,a better measure of labor market trends, fell 11,500 to 364,000.

U.S. stocks opened higher, while Treasury debt prices fellafter the data and the dollar extended gains against the yen.

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Recent data on the U.S. labor market has been encouraging.

Employers added a modest 114,000 jobs to their payrolls inSeptember, but the unemployment rate dropped sharply to 7.8percent, also the lowest level since Obama took office.

The claims report showed the number of people stillreceiving benefits under regular state programs after an initialweek of aid fell to 3.27 million in the week ended Sept. 29, thelatest data available. It was the lowest since May.

DECLINING TRADE

The monthly trade gap increased to $44.2 billion, from anupwardly revised estimate of $42.5 billion in July, the CommerceDepartment said. Analysts were expecting an August trade gap ofabout $44.0 billion.

Overall U.S. exports dropped 1.0 percent as troubles inEurope continue to weigh on global growth, while imports fell0.1 percent in a sign of faltering U.S. demand for consumerproducts, autos and capital goods.

"It looks like net exports will contribute negatively to GDP(gross domestic product) growth, subtracting as much as half apercentage point," said Michael Moran, chief economist at DaiwaSecurities America in New York.

Exports of oil, chemicals and other industrial supplies fellto the lowest level since February 2011, helping pull down theentire goods category, despite an increase in capital goodsexports to the second-highest level on record.

Services exports defied the overall trend and rose to arecord $52.8 billion, due mostly to an increase in professionaland business services and transportation.

Services imports also set a record, reflecting licensingfees to broadcast the Summer Olympic games in Britain.

The average price for imported oil rose slightly in Augustto $94.36 per barrel, helping to push the monthly oil importbill higher.

A separate Labor Department report showed that overall U.S.import prices rose 1.1 percent for the second consecutive monthin September, while U.S. export prices rose 0.8 percent.

Both increases were above expectations.

Analysts surveyed before the report had expected a 0.7percent increase in import prices and a 0.4 percent rise inexport prices.

(Reporting by Doug Palmer; Additional reporting by GertrudeChavez-Dreyfus and Ellen Freilich in New York; Editing by AndreaRicci)

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Keywords: USA ECONOMY/