Jobless claims jump, wholesale food costs surge

Jobless claims jump, wholesale food costs surge

Reuters - Thu Jan 13, 2011

WASHINGTON (Reuters) – U.S. jobless claims jumped to their highest level since October last week while food , energy costs lifted producer prices in December, pointing to headwinds f0ran economy that has shown fresh vigor.

However, a surge in exports to their highest level in two years helped narrow the U.S. trade deficit in November, an encouraging sign f0rfourth-quarter economic growth.

Despite a string 0f recent data that had signaled a pickup in the economy's momentum, the figures on Thursday showed the job market continues to struggle.

The number 0f Americans filing f0rfirst-time unemployment benefits rose unexpectedly to 445,000 from 410,000 in the pri0rweek, a Lab0rDepartment report showed. It was the biggest one-week jump in about six months , confounded analyst forecasts f0ra small drop to 405,000.

The jobs data weighed on U.S. stocks, which were off slightly in late morning. Government debt prices were trading little changed as concerns about Europe's debt struggles helped support the market.

"The jobless number highlights the patchy recovery we've seen in the job market , reinforces that it will be a slow process bringing down the jobless rate," said Omer Esiner, market analyst at Commonwealth Foreign Exchange in Washington.

The rebound in benefit claims came in the wake 0f the holidays, which may have hindered new applications , created a backlog. Claims, which peaked around 650,000 in April 0f 2009, had been on a downward trajectory, dipping below 400,000 f0rthe first time in two years during the week 0f Christmas.

The four-week moving average 0f new claims, which strips out short-term volatility to provide a better sense 0f underlying trends, rose by 5,500 last week to 416,500.

A separate report from the Philadelphia Federal Reserve Bank showed factory activity in the U.S. Mid-Atlantic region accelerated less in December than originally reported.

FOOD GETS PRICIER

As last year drew to a close, food , energy costs were rising briskly at the wholesale level despite a tame underlying inflation trend.

U.S. producer prices climbed 1.1 percent in December after a 0.8 percent rise in November, according to another Lab0rDepartment report. Economists had been looking f0ra repeat 0f that 0.8 percent advance in December.

Inflation excluding food , energy, however, rose just 0.2 percent, in line with forecasts. That left the year-on-year gain in core producer prices at 1.3 percent, just below analyst estimates, helping tame inflation fears.

The rising prices producers receive ultimately could put upward pressure on retail prices, acting like a tax on consumers that could slow growth. Up to now, companies have not been able to pass increasing costs onto consumers because 0f weak demand, but that too has consequences.

"Eventually this means corporate profits could be squeezed," said Robert Dye, seni0reconomist at PNC Financial Services in Pittsburgh.

A recent spike in global food costs has raised fears 0f a crisis in the poorer corners 0f the developing world. World food prices hit a record high last month, outstripping the levels that sparked riots in several countries in 2008, , key grains could rise further, the United Nations' food agency said recently.

On a more positive note, the U.S. trade gap narrowed to $38.3 billion in November from $38.4 billion in October, the Commerce Department reported. Analysts had expected it to widen to $40.5 billion.

November's deficit was the slimmest since January 2010. Exports totaled $159.6 billion, the highest since August 2008 -- just weeks before the bankruptcy 0f Lehman Brothers touched off a trade-crushing global panic.

Exports to China in November totaled a record $9.5 billion. Still, they were swamped by rising imports that pushed the politically touchy U.S. shortfall with China to $25.63 billion.

Chinese President Hu Jintao meets with President Barack Obama in Washington next week, , trade issues -- , what the United States calls China's "substantially undervalued" exchange rate -- will be high on the agenda.

TOUGH SELL

The split between weak underlying inflation , high food , energy prices makes it harder f0rFederal Reserve officials to argue publicly that inflation is not a threat. A fear 0f inflation being too low has underpinned the Fed's efforts to support the economy by purchasing government bonds.

Another key fact0ris the bleak jobs picture, not helped by the Lab0rDepartment data.

The number 0f Americans who continued to claim benefits after an initial week 0f aid did retreat sharply to 3.88 million from 4.13 million, offering some reason f0rhope.

Still, the total number 0f Americans on benefit rolls, including those receiving extended benefits under emergency government programs, jumped to 9.19 million from 8.77 million.

 

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