US jobless claims fall, but data clouded by processing glitch

Job seeker Michael Grosberg reviews his paperwork and resume during a job fair in New York on Aug. 22, 2013.
Craig Warga | Bloomberg | Getty Images
Job seeker Michael Grosberg reviews his paperwork and resume during a job fair in New York on Aug. 22, 2013.

The number of new U.S. jobless claims fell sharply last week but much of the decline appeared due to technical problems in claims processing, clouding the last major reading of labor market health before a Federal Reserve meeting.

Initial claims for state unemployment benefits slipped 31,000 to a seasonally adjusted 292,000, the Labor Department said on Thursday.

That was the lowest level of claims since 2006, confounding analysts' expectations for a mild increase.

But a department analyst said the majority of the decline appeared to be because two states were upgrading their computer systems and did not process all the claims they received during the week. One of the states was large and the other small, the analyst said.

While the drop in claims should be taken with a grain of salt, it doesn't change the view that employers appear to have ended a long cycle of elevated layoffs that began around the 2007-09 recession.

That has helped shape the view of Fed officials that the labor market is improving, and fueled expectations the U.S. central bank will start reducing a massive monetary stimulus program as early as its policy meeting next week.

The four-week moving average for new claims, which smoothes out volatility, had in prior weeks already fallen to its lowest levels since 2007. Last week, it fell by 7,500 to 321,250.

The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid fell 73,000 to 2.871 million in the week ended Aug. 31.

Import prices show tame demand

U.S. export prices fell for the sixth straight month in August while prices for non-petroleum imports fell, signs of slack in global demand and in the domestic economy. Export prices fell 0.5 percent during the month, the Labor Department said.

Much of the drop was due to a sharp decline in prices for exports from the volatile farm sector, but non-agricultural exports declined as well and have fallen in every month since March.

The decline comes despite some recent signs that the European economy is getting back into gear following a recent recession.

Economists polled by Reuters had expected export prices to rise 0.1 percent last month.

Import prices also confounded analysts during the month, remaining flat. Economists in the Reuters poll had expected a 0.4 percent gain.

Import prices have trended lower over the last year, with the decline driven largely by the non-oil component. This pattern was also evident in August, with fuel import prices up 0.5 percent and non-petroleum prices down 0.2 percent.

Non-petroleum import prices have now declined every month since February, a sign that foreign producers have little leverage to raise prices for consumers.

This has helped keep the pace of inflation very low over the last year - so low that some U.S. Federal Reserve officials have expressed concern. Fed Chairman Ben Bernanke has warned that extremely low inflation raises the risk that the economy could fall into a vicious spiral of falling prices and wages known as deflation.