WASHINGTON – U.S. wholesale prices barely budged in February while claims for jobless benefits dipped a bit last week, according to government reports on Thursday that could sooth budding inflation fears and fuel hopes the moribund job market will soon revive.
A sharp slowdown in energy price gains and a plunge in the cost of light trucks helped keep wholesale prices under wraps in February, the Labor Department (search) said.
The Producer Price Index (search), which measures prices paid to farms, factories and refineries, rose just 0.1 percent in February. The increase marked a sharp slowdown from January's 0.6 percent rise and came in well below the 0.4 percent advance expected on Wall Street.
Excluding volatile food and energy costs, producer prices also rose a tame 0.1 percent, a slowdown from January's 0.3 percent gain.
Separately, the department said first-time claims for state unemployment insurance slid 3,000 to 342,000 in the week ended March 27 from a revised 345,000 the prior week, suggesting mild improvement in the labor market.
Economists had forecast claims to rise 1,000 from the 339,000 initially reported for the March 20 week. The upward revision to the March 20 figures reflected the impact of annual changes in how the data is adjusted for seasonal variations.
Prices for stock futures and the value of the dollar were little changed in the immediate aftermath of the reports, while prices for U.S. bonds slipped slightly.
Economists said the mild rise in producer prices would support the willingness of the Federal Reserve to bide its time as it considers when to bump up overnight interest rates from their current 1958 low of 1 percent.
Rick Egelton, deputy chief economist at BMO Financial Group in Toronto, said the tame rise in producer prices gave the Fed "all kinds of room to maneuver."
"They don't need to be worried about inflation at this point," he said.
The rate of increase in the price of gasoline slowed to 2.0 percent from January's 14.1 percent spike. In addition, the cost of home heating oil, liquefied petroleum gas and diesel fuel -- all of which had risen in January -- turned down. Residential natural gas prices, however, continued to rise sharply.
While energy prices moderated, food prices rose 0.2 percent after a 1.4 percent plunge in January.
Prices for SUVs and light trucks dropped 1.9 percent on the heels of a big 1.1 percent gain in January. In addition, car price gains slowed, rising only 0.2 percent in February after an outsized 0.6 percent jump a month earlier.
Further back in the production pipeline, costs continued to march higher. So-called intermediate goods prices rose 0.9 percent and prices at the crude goods level rose 2.5 percent.
Some economists have expressed concern that sharp increases in commodity prices are offering an inflation warning sign. However, others argue inflation at the retail level is unlikely to flare while the U.S. labor market is still quite weak.
The report on jobless claims supported the view that the labor market is improving, if only slowly. New claims have exhibited a relatively stable pattern in recent months, showing the pace of layoffs has steadied after declining from relatively lofty levels.
A four-week moving average of new claims, which irons out weekly volatility, held steady last week at the more than three-year low of 340,250 reached a week earlier.
But so far, the slower pace of firing has not translated into a quickened pace of hiring. Since August, U.S. businesses have added only 364,000 jobs, an unusually weak performance this late into an economic recovery.
The dearth of new hiring has become a hot issue ahead of the November presidential election. Democrats have blasted President Bush for the 2.2 million jobs lost since he took office.
A fresh reading on job creation will come Friday, when the department is set to release its March employment report.
Analysts expect a payroll gain of 103,000 jobs, which would be the strongest advance in three years -- although still short of the pace needed to keep up with growth in the labor force.
Some economists, though, think job creation could well prove stronger.
In the report on jobless claims, the department said the number of people continuing to draw benefits after an initial week of aid rose 32,000 to 3.06 million in the week ended March 20, the latest week for which the data is available. But a four-week average of that labor-market barometer stayed close to levels not seen since the summer of 2001.