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Published: Friday, 10/16/2009

New jobless claims drop as inflation remains low

ASSOCIATED PRESS

WASHINGTON - New jobless claims dropped to the lowest level since January and the prices of many household goods stayed low last month, positive signs of stability for the economic recovery.

The decline in jobless claims shows companies are cutting fewer workers, though the drop isn't yet steep enough to signal new hiring, economists said.

The low level of inflation is holding down prices as Americans slowly regain their appetite to shop despite rising unemployment and tight credit conditions.

Yesterday's reports "all point to an economy that is starting to grow again," said Bernard Baumohl, chief global economist at the Economic Outlook Group.

Low inflation is consistent with the early stages of an economic recovery, he said. Even as business activity picks up, unemployment is still high and factories have enough spare capacity to increase output without prices rising.

The Labor Department said first-time claims for jobless benefits dropped to a seasonally adjusted 514,000 from a revised 524,000 the previous week.

The four-week average, which smooths fluctuations, fell for the sixth straight time to 531,500. That's the lowest since January and 125,000 below the April peak.

Economists closely watch initial claims, which are considered a measure of layoffs and the willingness of companies to add jobs.

In a separate report, the Labor Department said consumer prices rose 0.2 percent last month, matching analysts' expectations. Prices excluding the volatile energy and food categories also rose 0.2 percent.

Over the past 12 months, consumer prices fell 1.3 percent, as the recession kept a lid on inflation. Excluding food and energy, prices rose 1.5 percent.

The absence of price pressures has been good news for households, but it means no cost-of-living increase next year for 57 million Americans receiving Social Security and other government benefits, the first time that's happened in more than 30 years.



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