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US jobless claims at 7-year low, signal firming economy US budget deficit falls in March to $37 billion

WASHINGTON, April 10, (RTRS): The number of Americans filing new applications for unemployment benefits tumbled last week to the lowest level in nearly seven years, strengthening views of faster job growth. Thursday’s report was the latest sign of momentum in the economy after activity was hobbled by an unusually cold winter. “The return of warmer temperatures has brought with it better data. There are a number of signs that progress in the jobs market could be accelerating, a positive sign for the broad economy as well,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan. Initial claims for state unemployment benefits dropped 32,000 to a seasonally adjusted 300,000 for the week ended April 5, the Labor Department said. That was the lowest level since May 2007, before the start of the 2007-09 recession. The report joined other indicators such as automobile sales and employment data in suggesting the economy ended the first-quarter on a stronger footing, positioning it for faster growth in the April-June quarter.

First-quarter growth is expected to have braked sharply from the fourth quarter’s annual 2.6 percent pace, largely because of the harsh weather and businesses placing fewer orders with manufacturers while working off massive stockpiles accumulated in the second half of 2013. Growth was also seen crimped by the expiration of long-term unemployment benefits, cuts to food stamps and weak exports. First-quarter gross domestic product estimates range as low as 0.6 percent.

Data
US financial markets were little moved by the claims data. Economists had forecast first-time applications for jobless benefits falling to 320,000 for the week ended April 5. The number of people still receiving unemployment benefits after an initial week of aid for the week ended March 29 hit its lowest level since January 2008. “The rate of involuntary job losses slowed in early April, which suggests we could have a further pickup in job growth in April,” said John Ryding, chief economist at RDQ Economics in New York. “We think that the unemployment rate could fall faster than the Federal Reserve expects over the next year.” Job growth averaged about 195,000 per month in February and March, with the unemployment rate holding at near a five-year low of 6.7 percent over that period.

There have also been improvements in other labor market measures such as the short-term unemployment rate and job openings, which economists say suggest labor market slack is easing. Still the recent job market upturn is unlikely to see the Fed in a hurry to start raising interest rates when it wraps up its monthly bond buying program later this year. The US central bank slashed overnight interest rates to a record low of zero to 0.25 percent in December 2008 and pledged to keep them low while nursing the economy back to health.

Minutes of its March 18-19 policy meeting published on Wednesday suggested officials were not eager to start tightening monetary policy. A second report from the Labor Department showed import prices increased 0.6 percent last month after rising 0.9 percent in February. The increase exceeded economists’ expectations of a 0.2 percent gain and was driven by food prices, which recorded their largest advance in three years. Away from food, there was little sign of a broader pickup in imported inflation. The US government’s budget deficit shrank to just $37 billion in March from $107 billion in the same month last year, the latest sign of improvement in the nation’s finances. The deficit was the lowest for the month of March in 14 years.

The deficit fell partly because revenue jumped 16 percent to $216 billion, the Treasury Department said in its monthly budget report Thursday. Individual income and Social Security tax receipts have increased as employers have steadily hired more workers in the past year. Changes in the timing of about $40 billion in benefit payments and tax receipts were also a big reason for the smaller deficit. Most of that change involved benefit payments that were made in February this year but had occurred in March last year. Excluding the impact of those timing shifts, the deficit would have been $77 billion last month. Spending still dipped 2 percent in March, even excluding the timing shift.

Defense spending fell 16 percent to $45 billion last month, and spending on unemployment benefits also fell. Corporate profits have also perked up from last year, boosting corporate tax receipts 7 percent in March, to $36 billion. The government’s 2014 budget year began Oct 1 and is now half over. In the first six months of the budget year, the deficit was $413 billion, down from $600 billion in the first half of last year. Tax receipts rose 10 percent in the October-March period, the Treasury Department says, while spending fell 4 percent. President Barack Obama projected last month that the deficit for the full year will drop to $649 billion, down from $680 billion in the previous year.

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