Unemployment Claims Take Record Nose-Dive : Economy: New filings for jobless benefits fall below 400,000. Corporate profits climb to new high.

The number of Americans filing new claims for jobless benefits shrank by a record 92,000 in mid-August and fell below 400,000 for the first time in nearly two years, the government reported Thursday.

In other reports, the Commerce Department reported that corporate profits grew to record levels in the second quarter as the nation’s gross domestic product rose at a slim 1.4% annual rate in April through June, the same as estimated in July. The GDP rate was less than half of the 2.9% in the first quarter.

Analysts were heartened by the improvement in new jobless claims but hesitant to read too much into the one-week report that reflected a large drop in claims that had been boosted by a temporary layoff at General Motors.

Many believe the number of claims will remain stuck around the 400,000 level until economic growth picks up enough to produce new jobs.

The Labor Department said first-time claims for unemployment insurance totaled 382,000 in the week ended Aug. 15. That was down from 474,000 a week earlier when the number included 74,000 applications from most of the GM employees in Michigan who had received layoff notices.

The department said the 92,000 drop was the largest since it began recording claims in 1967.

It was the first time claims fell below the 400,000 mark since they reached a similar 382,000 level during the week ended Oct. 6, 1990. The following week, they rose to 407,000 and had been above 400,000 ever since.

While cautioning that the latest report covered just one week, economist Lynn Reaser of First Interstate Bancorp of Los Angeles called the drop below 400,000 “significant.”

“If maintained, it would indicate the worst of the layoffs are over and that would help consumer confidence” and boost economic growth, she said.

Many analysts prefer to track a four-week moving average of claims because it smoothes out the volatility of the weekly reports and is considered a more reliable indicator of the labor market.

The average was 432,000 during the period ended Aug. 15, down from 436,500 a week earlier.

In the corporate profits report, the Commerce Department said tough corporate cost-cutting measures, including stiff payroll cutbacks, sent profits up by 2.1% to a record $235 billion after taxes. Companies are squeezing more output from each employee, fattening profits even as growth slows.

“The recovery is dragging, and in the second quarter the fruits of the recovery were going to a considerable degree into profits,” said Robert Dederick, an economist with Northern Trust Co. in Chicago.

Dederick said business should now use some of those profits to increase spending and hiring in order to help the economy grow.

The second-quarter increase follows a 10.8% gain in the first quarter, the best in four years, the Commerce Department said.

Economists said profits are improving despite sluggish economic growth because lower interest rates have reduced corporations’ borrowing costs and because companies have held wage increases to a minimum and cut jobs.

The gross national product report noted that the rate of price rises was higher than previously estimated. One measure, the department’s implicit price deflator measure of inflation, rose at a 2.7% annual rate instead of 2.4% as was thought a month ago.

Gross Domestic Product

The GDP measures all the goods and services produced by workers and capital located in the United States, regardless of ownership.

Percent change from previous quarter.

2nd quarter: +1.4% (revised)

Quarterly at annual rate

Source: Commerce Department