Jobless Claims Plunge

The number of Americans filing new claims for unemployment benefits plunged by 36,000 last week. It was the biggest drop in more than three years but Labor Department analysts cautioned that special factors were overstating the improvement.

The Labor Department said Thursday that the huge decline pushed applications for jobless benefits down to a seasonally adjusted 296,000 last week, marking the third straight week of falling claims. But department analysts cautioned that the department's normal seasonal adjustment process was being skewed by the fact that Easter came so early this year. Because the department's seasonal adjustments have trouble picking up that change, last week's decline vastly overstated the improvement in the labor market.
They said a better gauge of last week's change was seen in the four-week moving average for claims which declined by a smaller 8,500 to 330,250.

The seasonal adjustment process expected claims to fall by 6.5 percent last week, or 22,000, and instead claims fell by 16.6 percent, or 56,000. Analysts said the early Easter, by affecting such things as spring break, had an impact on layoff decisions and jobless applications.

The decline of 36,000 was the biggest drop since a decline of 73,000 the week of Dec. 8, 2001.

Analysts said the four-week moving average was pointing to a gradually improving labor market. However, they cautioned that the surge in energy prices this year could cause the job improvements to stall out if the economy hits another "soft patch," such as the one last year that was also caused by a rise in energy costs.

There have been a number of economic reports in recent weeks that have flashed warning signs of an impending slowdown, from weaker-than-expected retail sales and industrial output to a big plunge in home construction.

The Federal Reserve has been raising interest rates at a gradual pace since last June and economists expect those rate increases to continue, even in the face of a slowing economy, because of rising concerns about inflation pressures.

The Labor Department reported Wednesday that consumer prices rose by 0.6 percent in March, the biggest increase in five months. And even more worrisome, excluding volatile energy and food prices, core inflation was up 0.4 percent last month, the biggest increase in 2 1/2 years.

� 2005 The Associated Press