New unemployment claims drop to lowest in 14 weeks

WASHINGTON -- New applications for jobless benefits plunged to the lowest level in 14 weeks, a sign that the wave of layoffs may have peaked. Still, the number of unemployed workers continuing to get benefits climbed to a new record.

The Labor Department says the number newly laid off workers applying for benefits dropped to 601,000 last week. That was far better than the rise to 635,000 claims that economists expected.

But the number of people who are receiving jobless benefits climbed to 6.35 million, setting a record for a 14th straight week.

The four-week moving average of initial jobless claims, which smooths out volatility, totaled 623,500 last week, down more than 30,000 from the high in early April. Goldman Sachs economists have said a decline of 30,000 to 40,000 in the four-week average is needed to signal a peak.

In a second report Thursday, the Labor Department said productivity, the key ingredient to rising living standards, grew at a 0.8% annual rate in the January-March quarter, slightly better than the 0.6% increase economists had expected.

Wage pressures, measured by unit labor costs, increased at a 3.3% rate, higher than the 2.8% rise economists expected but lower than the 5.7% spike in the final three months of last year.

Both the rise in productivity, output per hour worked, and the easing in wage pressure can be explained by the sour economy, where fewer workers are doing the same work but don't feel they can demand higher wages.

The report showed that even though output plunged the first three months of the year, the number of hours worked fell more, reflecting widespread layoffs.

Productivity is considered the key ingredient for rising living standards because it allows businesses to pay their employees higher wages financed by the increased output. That means companies can increase employee compensation without raising prices.