WASHINGTON, March 7, (Agencies): The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting a pick-up in the labor market recovery and economic growth. But the growth outlook was dimmed somewhat by another report on Thursday showing a widening in the trade deficit in January as imports rebounded after being held down by port disruptions. “It’s once again supporting the thought that the economic recovery is strengthening,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York. Initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 340,000, declining for a second straight week, the Labor Department. The drop confounded economists’ expectations for a rise to 355,000.

The four-week moving average for new claims, a better measure of labor market trends, also fell 7,000 to 348,750 — the lowest level since March 2008 — pointing to some firming in underlying labor market conditions. Coming at a time when the economy is dealing with higher taxes and deep government spending cuts, the drop in claims is encouraging as it suggests an improvement in the pace of hiring, putting more money in consumers’ pockets. In a separate report, the Commerce Department said the trade gap rose to $44.45 billion in January from a shortfall of $38.14 billion in December. The inflation adjusted trade deficit widened to $48.0 billion from $44.2 billion in December. Economists said this implied trade would be a small drag on first-quarter growth.

Outlook
“The sharp deterioration in trade shaves a bit from the outlook for growth in the first quarter. There are signs that domestic demand is firming, which would provide a major offset to weakness abroad,” said Diane Swonk, chief economist at Mesirow Financial in Chicago. Stocks on Wall Street were trading slightly higher on the claims data, while prices for US Treasury debt fell. The dollar weakened broadly against a basket of currencies. The claims data has no bearing on February’s employment report, due on Friday, as it falls outside the survey period. According to a Reuters survey of economists, employers probably added 160,000 jobs last month, a small pick-up up from January’s 157,000 count. That would just be enough to hold the jobless rate steady at 7.9 percent.

Economists say job gains of at least 250,000 per month over a sustained period are needed to significantly dent the ranks of the unemployed. Job growth averaged 200,000 in the last three months. US worker productivity shrank in the final three months of last year, mostly because of temporary factors that dragged down growth. Productivity contracted at a seasonally adjusted annual rate of 1.9 percent in the October-December quarter, the Labor Department said Thursday. That’s about the same as last month’s estimate of a 2 percent decline. It followed a 3.1 percent gain in the July-September quarter. Productivity is the amount of output per hour of work. It shrank because economic activity barely expanded in the fourth quarter, while hours worked rose at a solid pace.

The decline in productivity doesn’t necessarily signal more hiring. That’s because the economy’s 0.1 percent annual growth in the fourth quarter was due to defense cuts and slower company restocking. Those trends should reverse in the current quarter. Still, the trend in productivity has been fairly weak. For all of 2012, productivity rose by just 0.7 percent, after an even smaller 0.6 percent rise in 2011. Those gains were less than half the average growth in 2009 and 2010, shortly after many companies laid off workers to cut costs during the Great Recession. And it’s below the long-run trend of 2.2 percent growth a year dating back to 1947.

US retailers are reporting modest sales gains for February as consumers, uninspired by cool weather and worried about the economy, shopped cautiously for spring merchandise. Overall, 15 retailers reported on Thursday that revenue at stores open at least a year — a key indicator of retail health — rose an average of 1.7 percent. That number comes from the International Council of Shopping Centers. It is a sharp slowdown from the 4.5 percent pace in January when shoppers splurged on holiday clearances. Costco Wholesale Corp. reported strong sales that beat analysts’ expectations, but several other chains such as Ross Stores Inc. and Fred’s Inc posted declines. Economists closely monitor consumer spending because it accounts for more than 70 percent of economic activity.