US jobless claims fall as weak exports push up trade deficit

The number of Americans filing new claims for unemployment benefits fell more than expected last week, in a boost to the labour market outlook and the broader economy.

Other data today showed a weakening in exports in December, which if it extends to January could see trade being a drag on growth in the first quarter after it helped to buoy the economy in the last three months of 2013.

"The underlying economic trend is still positive," said Craig Dismuke, chief economic strategist at Vining Sparks in Memphis. Initial claims for state unemployment benefits declined 20,000 to a seasonally adjusted 331,000, the US Labor Department said.

That was a bit lower than economists’ expectations for a fall to 335,000 in the week ended February 1st. The data has no bearing on January’s employment report, which will be released tomorrow, as it falls outside the survey period.

Still, it bodes well for the jobs market. The dollar extended gains against the euro and was little changed against the yen after the claims data, while US Treasury debt prices fell and stock index futures rose.

Hiring is expected to have accelerated in January after being held down by unseasonably cold weather the prior month. Non-farm payrolls likely increased 185,000 last month, up from December’s tepid 74,000 count. The unemployment rate is forecast to hold steady at a five-year low of 6.7 per cent. That would be confirmation that the economy continued to expanded after robust growth in the second half of 2013, which was driven by consumer spending, inventory accumulation and trade. But economy could lose some support from trade.

In a separate report, the US Commerce Department said the trade deficit increased 12 per cent to $38.7 billion in December as exports recorded their largest decline since October 2012.

When adjusted for inflation, the trade gap rose to $49.5 billion in December from $45.0 billion the prior month.

The government in its first estimate of fourth-quarter GDP last week cited trade as one of the key contributors to the economy's 3.2 per cent annual growth pace during the period. Trade added 1.33 percentage points to fourth-quarter GDP growth as exports expanded at their quickest pace in three years and imports slowed. There are, however, doubts that the robust export growth pace can be sustained in light of slowing growth in markets like China.