New claims for unemployment benefits in the US fell in the first week of October to their lowest level in eight months, increasing hopes that the sluggish jobs market has finally turned and aiding a recovery by the US dollar.
In the week ending October 4th, the number of Americans claiming jobless benefits for the first time fell to 382,000.
Economists had predicted on average that the total would be at least 10,000 higher.
The weekly jobless claims data are volatile and subject to revision. But the four-week moving average, which smooths out some of the volatility, fell to 393,500, the lowest since February and well below the average during September.
The figures coincided with the publication of a survey showing US business leaders are still wary about investing in equipment and hiring employees even though their confidence in the economic recovery has increased and they have strong hopes of higher profits, according to a survey.
About half the 120 chairmen and chief executives polled ahead of yesterday's US Business Council summit in West Virginia said capital spending in their companies would be flat in 2004. A third said they were expecting only modest increases. This contrasts with widespread optimism about the ability of the US economy to grow and generate higher profits.
"The survey data on jobs, capital spending and inventories is not as positive as expected - given the CEOs' expectations of a pick-up in the economy," said the business council organisers.
Almost none of those polled viewed the US economy as still in recession, while the fear of a double-dip recession, seen in previous surveys, has vanished.
The positive jobs data helped the dollar make sharp gains against a range of currencies yesterday, regaining some of the ground lost in previous sessions.
The euro, which hit a three-month high at $1.186 in early London trade, dropped to $1.171 by mid-session in New York. The Australian dollar slipped from six-year highs at $0.695 to $0.687 yesterday.
Traders said the moves were triggered by a bout of profit-taking following the dollar's recent weakness but strategists believe the dollar's wider downward trend remains in place.
Mr Adam Cole, strategist at Crédit Agricole Indosuez, said the market was still in the mood to "buy on the dips", implying further weakness for the dollar.
"That mentality is dominant," he said. "This move is really the dollar playing catch-up with the weak bonds and strong equities we're seeing." Moreover, analysts have warned increased volatility is something the market will have to become accustomed to.
- (Financial Times Service)
