Drop in US jobless claims raises hopes for economy

Fewer Americans turned to the government for unemployment benefits last week than at any time since the 2008 meltdown, raising hope the economy is nearing cruising speed, as well as fears of another false start. New claims for jobless benefits fell to the lowest level since April 2008, the Labor Department said Thursday, reporting fewer layoffs in most states. "This is great news," said Ian Shepherdson of High Frequency Economics, pointing to a solid downward trend in claims for recent weeks. "One unexpectedly low number can easily be a fluke; two are interesting; three are telling us something real is happening in the labor market." The data was better than most economists expected, with claims hitting 364,000 last week versus the consensus estimate of 380,000. The downward claims trend matched data from earlier in the month showing the national unemployment rate dropping to 8.6 percent in November from 9.0 percent the month before. "The US has been creating jobs for 14 months in a row, and the all-inclusive jobless rate has fallen to 15.6 percent from the 17.4 percent peak," said Jennifer Lee of BMO Capital Markets. "In other words, the job market is improving." But after several glimmers of sunshine that have been later clouded by shocks from the Middle East, Japan and Europe, there is also some skepticism. "Holiday hiring is clearly cutting into unemployment much more deeply than it did last year," said Chris Low of FTN Financial. "Of course, we cannot know if claims will stay this low when the holiday season is over." Other data released on Thursday appeared to lend credence to doubts about a clear-cut economic revival. The US economic growth rate was revised down to 1.8 percent for the third quarter, the Commerce Department said Thursday, as household spending dropped. Growth was down 0.2 percentage point versus the previous estimate and below economists' expectations. Imports, which subtract from growth, also increased. "At first glance, not great news," said Jennifer Lee of BMO Capital Markets. While economists now expect growth to bounce back to as high as 3.7 percent in this quarter, Washington's political gridlock and the ongoing debt crisis in Europe are casting a pall over 2012. "Growth prospects are still uncertain and would depend on the ability of the Congress to extend fiscal stimulus measures by the end of this year," said Thomas Julien, an economist with Natixis investment bank. On Thursday the Republican-dominated House of Representatives was still refusing to pass a temporary extension of tax cuts and unemployment benefits that would help juice the economy. President Barack Obama was expected on Thursday to heap pressure on Republicans to extend the tax break for 160 million Americans for two months, seeking to lock in an apparent political victory.