WASHINGTON, March 14, (Agencies): The number of Americans filing new claims for unemployment benefits dropped for a third straight week last week, the latest indication the labor market recovery was gaining traction. Other data on Thursday showed a spike in the cost of gasoline pushed up producer prices last month, but the lack of broad price pressures gives the Federal Reserve scope to maintain its very accommodative monetary policy stance even as the job market strengthens. Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 332,000, the Labor Department said. Economists polled by Reuters had expected first-time applications for jobless aid to rise to 350,000.
The four-week moving average for new claims, a better measure of labor market trends, fell 2,750 to 346,750, the lowest level in five years - suggesting a firming in underlying labor market conditions. The report follows news last week that nonfarm payrolls increased 236,000 in February, with the unemployment rate falling to a four-year low of 7.7 percent.

Reinforced
“This report reinforced the message we got from last Friday’s payroll report. There is a speed-up in the economy. The economy is healing,” said Pierre Ellis, senior global economist at Decision Economics in New York.
US stock index futures rose after the data, along with yields on US government debt. The dollar extended gains against the yen and the euro.
In the 12 months through February, core PPI was up 1.7 percent, the smallest rise since January 2011. It had increased 1.8 percent in January.
While gasoline prices pushed up overall PPI last month, they have started to decline from their lofty levels, which should keep inflation pressures benign and boost consumers’ purchasing power.
The steady job gains are helping to prop up wages, supporting domestic demand. Though layoffs have ebbed, sluggish domestic demand has made companies cautious about ramping up hiring.

A government report on Tuesday showed layoffs in January were the fewest since 2000. The signs of strength in the labor market could intensify the debate at the Fed on the future course of monetary policy. Despite the improvement in the jobs market, economists do not expect a shift in policy anytime soon.
“The Fed will not exit until they are sure the economy is on a sustained path. This is not going to tip their thinking about stimulus because these things could peter out like what we saw (in the) last couple of years,” said Ellis.
Policymakers meet next week to assess economic conditions.
Concerns over high unemployment prompted the US central bank last year to launch an open-ended bond buying program, but divisions are emerging among policymakers about the program.
The central bank is buying $85 billion in bonds per month and has said it would keep up its asset purchases until it sees a substantial improvement in the labor market outlook. It hopes the purchases will drive down borrowing costs to spur faster economic growth.
The number of people still receiving benefits under regular state programs after an initial week of aid dropped 89,000 to 3.02 million in the week ended March 2. These so-called continuing claims were at their lowest level since June 2008.
A measure of US wholesale prices rose in February by the most in five months, pushed higher by more expensive gas and pharmaceuticals. But outside those increases, inflation was mild.
The producer price index grew a seasonally adjusted 0.7 percent in February from January, the Labor Department said Thursday. That’s up from 0.2 percent in the previous month. Wholesale gas prices increased 7.2 percent.
 

Even with the increase, wholesale prices have risen just 1.7 percent in the past 12 months. That’s below the Federal Reserve’s 2 percent inflation target. Mild inflation gives the Fed more latitude to continue with its aggressive policies to spur more economic growth.
The index measures the cost of goods before they reach consumers. Wholesale prices are what manufacturers and farmers receive for their products from retailers and distributors.
Excluding volatile food and energy costs, core wholesale prices rose only 0.2 percent last month. In the past 12 months, core prices have increased 1.7 percent.
Higher pharmaceutical costs accounted for 20 percent of the increase in core prices last month. Car and pickup truck prices also rose.
Wholesale food prices fell 0.5 percent last month, led by an 18 percent drop in vegetable costs, the most in nearly two years. The price of broccoli, cauliflower and lettuce all fell sharply.
Gas prices have soared this year after falling at the end of 2012. The national average price for a gallon of gas jumped from $3.42 on Jan. 31 to $3.78 on Feb 28.
 

Since then, however, gas prices have come down a bit. They averaged $3.70 a gallon Wednesday.
Higher wholesale prices don’t always mean consumers will soon pay more. High unemployment and weak pay gains are making it difficult for retailers to pass on higher costs to consumers.
The US current account trade deficit narrowed in the final three months of 2012. But that didn’t prevent the deficit for the entire year from climbing to the highest level in four years.
The Commerce Department reported Thursday that the current account deficit in the October-December quarter narrowed to $110.4 billion, down 1.8 percent from the previous quarter. The improvement reflected gains in Americans’ earnings on their foreign investments and stronger earnings on service trade, a category that covers such things as airline travel.
For the year, the current account deficit widened to $475 billion, a 1.9 percent increase from 2011. It was the largest annual imbalance since 2008.
The current account is the broadest gauge of trade. It tracks not only the sale of goods and services but also investment flows.

Economists closely watch the current account because it shows how much the United States must borrow from foreigners.
Many economists believe the current account deficit will widen slightly in 2013 as a small pickup in global growth helps US export sales but these gains are outpaced by rising demand in the United States for imports.
The current account deficit hit an all-time high of $800.6 billion in 2006. It then shrank after a deep recession reduced US demand for foreign goods by a greater amount that US export sales diminished.
The trade deficit has been widening again after the US recession ended in June 2009.
The slight narrowing of the deficit in the fourth quarter left it at an equivalent of 2.8 percent of the total economy, as measured by the gross domestic product.
The overall economy grew at a scant annual rate of 0.1 percent in the October-December quarter. But recent signs of strength have many economists boosting their forecasts for growth in the current January-March quarter to around 2 percent or better.