Jobless Benefit Claims Take Unexpected Dip

The number of Americans applying for state unemployment benefits unexpectedly fell last week for the first time in more than a month, suggesting a hefty jobs gain will be reported in today’s August employment report.

First-time jobless claims dropped by 15,000 to a seasonally adjusted 316,000 in the week ended Aug. 31, the Labor Department reported Thursday. Analysts had expected a small increase. A week earlier, claims rose by a revised 5,000.

Treasury bonds slumped on the news and word of a rebound in retail sales. The strength increases the likelihood the Federal Reserve Board will raise interest rates to cool an economy that continues to power ahead and create jobs at a rate that could trigger higher inflation. History suggests “the economy is now operating in an inflationary danger zone, albeit by a small amount,” said Federal Reserve Gov. Janet Yellen.

The benchmark 30-year Treasury bond yield rose to 7.15%. U.S. stocks also slumped, with the Dow Jones industrial average falling 49.94 points to close at 5,606.96. The dollar rose against other major currencies.

The Fed’s policy-setting Federal Open Market Committee next meets Sept. 24. Many Fed officials remain concerned about worker shortages and rising labor costs, which could trigger rising consumer prices. The jobless-claims decline “plays into fears that the labor market is roaring ahead,” said James Padinha, an economist at MMS International in San Francisco.

Then again, Yellen said, “The jury’s still out” on the Fed’s next move.

Also pointing to strength in the economy, retailers’ sales rebounded in August from their summer doldrums, in part because of strong demand for school clothing, industry figures showed. Among department stores, Saks Holdings Inc. had the largest gain in same-store sales, 13.2%.

However, Dayton Hudson Corp. didn’t fare as well. Its Dayton’s, Hudson’s and Marshall Field’s stores saw sales drop 9.1%. Clothing retailer Gap Inc. reported its sales were unchanged, sending its stock plunging as much as 15%.

Sales during the Christmas season, which is just months away, should be stronger than last year’s dismal performance, said David Orr, an economist at First Union Corp. in Charlotte, N.C. “This year doesn’t have to be a blockbuster in order for the numbers to look very decent,” Orr said.

Also Thursday, a survey showed the percentage of Americans who were delinquent on their mortgage payments declined in the second quarter and may be headed even lower.

The Mortgage Bankers Assn. of America said the delinquency rate fell to 4.35% in the second quarter from 4.46% in the first quarter. The rate was 4.48% in the fourth quarter.

What that means in practical terms is that about 4.35% of the 21.8 million loans in the MBA’s survey were delinquent by at least 30 days. MBA officials said they expected the delinquency rate to continue to fall in the coming quarters.

“Delinquency rates may have peaked for this economic cycle,” said Warren Lasko, executive vice president at the MBA. “What we’re seeing now is a modest improvement in the level of delinquencies spurred by a growing economy and interest rates that are still low by historical standards.”