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Economic Reports Ease Inflation Fears

March 16, 2001|From Reuters

WASHINGTON — The tight U.S. labor market showed signs of loosening over the last four weeks while costs of imported products inched only slightly higher in February, the government said Thursday.

The reports showed there was little reason to fear a surge in inflation and suggested the Federal Reserve has leeway to dramatically cut interest rates at its next meeting on Tuesday, economists said.

They also noted that two other reports showed hope for a pickup in the hard-hit manufacturing sector as well as continued strength in the housing market.

The government also said Thursday that the United States continued to import more than it exported at the end of last year, pushing the broadest measure of U.S. trade to a record deficit of $115.3 billion in the fourth quarter. That widening helped push the trade gap for all of 2000 to a record as well.

On the employment front, the Labor Department said the weekly average of the number of people signing up for first-time unemployment benefits during the last four weeks rose to its highest level in more than 2 1/2 years.

The widely watched four-week moving average of initial claims rose to 364,250 in the week ended March 10 from 356,500 in the prior week, the department said. That was the highest level since July 11, 1998, when the figure stood at 366,500.

The report suggested that the labor market may be easing, relieving potential inflation pressures as workers have less clout to negotiate bonuses and raises. However, economists said the uptick in claims was not so dramatic as to signal a large increase in the unemployment rate, which was at 4.2% in February, just above a 30-year low.

In other inflation news, the Labor Department said prices of imports inched higher last month as sharp gains in petroleum prices more than offset drops in imported food, feed and drink costs.

U.S. import prices rose 0.1% in February after a 0.1% decrease in January, the department said. The data, which matched estimates from private economists, suggested that little inflation was being imported from overseas.

The jobs and price data were released five days before the inflation-fighting Federal Reserve meets to discuss interest rates. The Fed is expected to cut rates by at least half a percentage point to boost the rapidly cooling economy.

In another report, the Commerce Department said the U.S. current account trade deficit widened to a record $435.4 billion in 2000, up from the previous record of $331.5 billion set in 1999, pushed in part by a record fourth-quarter gap.

Most of the increase in 2000 was due to a rise in the goods and services deficit, although net outflows for unilateral current transfers, which include foreign aid, also rose.

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