US jobless claims jump, wholesale food costs surge

US jobless claims jumped to their highest level since October last week while food and energy costs lifted producer prices in December, pointing to headwinds for an economy that has shown fresh vigour. However, a surge in exports to their highest level in two years helped narrow the US trade deficit in November, an encouraging sign for fourth-quarter economic growth.
Despite a string of recent data that had signalled a pickup in the economy's momentum, the figures on Thursday showed the job market continues to struggle. The number of Americans filing for first-time unemployment benefits rose unexpectedly to 445,000 from 410,000 in the prior week, a Labour Department report showed. It was the biggest one-week jump in about six months and confounded analyst forecasts for a small drop to 405,000.
The jobs data weighed on US 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 and 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 of the holidays, which may have hindered new applications and created a backlog. Claims, which peaked around 650,000 in April of 2009, had been on a downward trajectory, dipping below 400,000 for the first time in two years during the week of Christmas. The four-week moving average of new claims, which strips out short-term volatility to provide a better sense of 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 US Mid-Atlantic region accelerated less in December than originally reported.
As last year drew to a close, food and energy costs were rising briskly at the wholesale level despite a tame underlying inflation trend. US producer prices climbed 1.1 percent in December after a 0.8 percent rise in November, according to another Labour Department report. Economists had been looking for a repeat of that 0.8 percent advance in December.
Inflation excluding food and 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 of weak demand, but that too has consequences. "Eventually this means corporate profits could be squeezed," said Robert Dye, senior economist at PNC Financial Services in Pittsburgh. November's deficit was the slimmest since January 2010. Exports totalled $159.6 billion, the highest since August 2008 - just weeks before the bankruptcy of Lehman Brothers touched off a trade-crushing global panic.