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.

If that’s the case, interest rates may surge as investors bet that the Federal Reserve Board will tighten credit soon, analysts say.

Other data Thursday also pointed to a surprisingly healthy economy: Many major retailers said they enjoyed strong August sales gains, and second-quarter mortgage delinquency rates were reported to have dropped.

The Labor Department report on unemployment benefits showed that first-time jobless claims fell by 15,000 to a seasonally adjusted 316,000 in the week ended Aug. 31. Analysts had expected a small increase. A week earlier, claims rose by a revised 5,000.

Benefit claims trends often foreshadow strength or weakness in the government’s monthly report on overall job growth. The August report, due today, will be closely studied by the Federal Reserve Board, which has been debating whether to raise short-term interest rates to brake the economy’s pace and thus subdue the threat of rising inflation.

History suggests “the economy is now operating in an inflationary danger zone, albeit by a small amount,” Fed Gov. Janet Yellen remarked Thursday.

The Fed’s policy-setting Open Market Committee next meets on Sept. 24, although it could authorize an interest-rate increase even before then.

But Yellen also said Thursday that “the jury’s still out” on the Fed’s next move.

Also pointing to strength in the economy, many retailers’ sales rebounded in August from their summer doldrums, in part because of strong demand for school clothing, industry figures showed.

Among major retailers, May Department Stores’ sales at stores open at least one year (same-store sales) rose 7.9% in August, while J.C. Penney’s rose 7%. Wal-Mart showed a 5.3% sales gain and Sears’ U.S. sales rose 4.4%.

But Kmart’s sales rose just 1.4% and Dayton Hudson’s were up only 1.9%.

Among specialty retailers, Pacific Sunwear’s same-store sales soared 19% in August, and many other teen-oriented chains also did well. But Gap said its sales were unchanged for the month.

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,” he 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 lower.

The Mortgage Bankers Assn. 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 MBA’s survey were delinquent by at least 30 days. MBA officials said they expected the delinquency rate to continue to fall.

Thanks to the strong economy, “Delinquency rates may have peaked for this economic cycle,” said Warren Lasko, executive vice president at the MBA.