December 9, 2004
By Alister Bull
Yahoo Finance

WASHINGTON (Reuters) - U.S. jobless claims rose unexpectedly last week in more worrying news for the labor market, government data showed on Thursday, while other indicators offered more positive signals for the economy.

The Labor Department said the new claims for jobless benefits grew unexpectedly last week to 357,000. A Reuters poll of analysts had forecast first-time claims would fall to 335,000 from 349,000 the previous week, which had been shortened by Thanksgiving Day.

However, other reports showed a gain in wholesale inventories, which is a plus for fourth-quarter growth, while a survey of Midwest manufacturers by the Chicago Federal Reserve bank headed higher.

Import prices were slightly stronger, possibly flagging the impact of a weaker dollar, although stripping out volatile commodity and fuel prices painted a milder underlying picture.

U.S. Treasury bond prices slipped slightly, taking 10-year yields to 4.17 percent. The Dow Jones industrial average ended the day up 58 points and the dollar was changing hands against the euro at $1.3305 at 5:30 p.m. EST.

The Federal Reserve, expected to raise interest rates by a quarter point at its upcoming meeting on Tuesday to 2.25 percent, scrutinizes import costs for evidence that a weaker dollar is fueling inflation.

But it also has said that job market slack will help keep prices in check and the latest numbers hint that employment conditions remain lukewarm.

HOLIDAY SKEWS CLAIMS

A Labor Department official said higher jobless claims in the week after a holiday was typical. But they have now risen for two consecutive weeks, returning them to the highest level since late September, Labor Department records show.

"They were a little weaker than expected, with claims going up 8,000 and I think the survey consensus had called for a decline of about 14,000," said Gary Thayer, chief economist with A.G. Edwards & Sons in St. Louis.

"It suggests that the labor markets are a little softer here heading into the end of the year," he said.

Thursday's release comes after disappointing news on U.S. employment. Only 112,000 new jobs were created in November -- much less than expected -- and U.S. businesses reported a rise in the number of planned job cuts last month.

The four-week moving average, which smooths weekly fluctuations to provide a better picture of trends, advanced 4,750 to 341,250, also marking its second straight increase.

IMPORT PRICES

The Labor Department separately said the price of imported goods in November rose 0.2 percent, slightly more than expected with Wall Street looking for a 0.1 percent advance after a revised 1.6 percent gain in October.

Nonpetroleum import prices increased 0.7 percent last month after falling 0.1 percent in October, the largest increase since January. On an annual basis, this series has risen 3.4 percent, marking the strongest gain since September 1995.

But Labor said higher natural gas prices were the largest contributor to the overall gain in nonpetroleum import costs.

Import prices can be influenced heavily by the foreign exchange value of the dollar but the currency's two-year slide has so far had only a modest impact.

Stiff competition has kept costs in check and indices like imported autos and consumer goods, which strip out commodity and fuel-price effects, have shown only mild growth by rising 2.1 percent and 0.4 percent respectively on an annual basis.

Other data was more unambiguously positive. The Commerce Department (news - web sites) said inventories at wholesalers rose 1.1 percent, over twice what was expected, while sales were strong.

Economists at Morgan Stanley said they had raised their growth forecast for fourth-quarter gross domestic product to 4.1 percent from 3.9 percent, based on the report.

In addition, the Chicago Federal Reserve Bank's Midwest manufacturing index rose to 118.2 in October from 116.1, led by strength in steel and autos.

And the U.S. home loan industry reported the mortgage delinquency rate edged down in the third quarter to 4.41 percent from 4.43 percent in the previous three months, thanks to stronger economic growth.

(Additional reporting by Mark Felsenthal in Washington, Dean Patterson in New York and Ros Krasny in Chicago)

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