New US claims for unemployment benefits dropped to a two-month low last week, hinting at some stability in the labour market, while producer prices recorded their largest gain in five months.
Although the reports today confirmed the economy remained on a slow growth path, they further reduced the odds of a double-dip recession and deflation feared by financial markets.
"The economy will not run away, but at least it's not shriveling," said Pierre Ellis, senior economist at Decision Economics in New York.
Initial claims for state unemployment benefits slipped 3,000 to a seasonally adjusted 450,000, the lowest since the week ended July 10, the Labor Department. Financial markets had expected a rise to 460,000.
In a second report, the department said its seasonally adjusted index for prices paid at the farm and factory gate increased 0.4 per cent after gaining 0.2 per cent in July. Markets had expected a 0.3 per cent increase last month.
US stock index futures cut losses on the data, while Treasury debt prices trimmed gains. The US dollar slipped against the yen.
A Labor Department official said data for only two states had been estimated for last week's jobless claims report. The four-week average of new claims, considered a better measure of underlying labour market trends, dropped 13,500 to 464,750.
The second straight week of declines pulled claims for unemployment benefits further away from a nine-month high of 504,000 touched in mid-August and claims are now in the upper end of a 400,000-450,000 range that analysts say is associated with sustainable job growth.
The impaired labour market, characterised by a 9.6 per cent unemployment rate, is hobbling the economy's recovery from its most painful recession since the 1930s.
The Federal Reserve is closely watching the jobs market, but is not expected to announce any news steps to ease monetary policy at a regular meeting next Tuesday. Many analysts, however, believe it will resume purchases of government debt by year-end to keep interest rates low and shore up the economy.
Reuters