Weekly U.S. jobless claims drop sharply

The number of Americans filing new claims for unemployment benefits plunged by the largest amount in 2½ years last week, reflecting a slowdown in layoffs in the auto industry.

The Labor Department reported that new benefit claims dropped by 34,000 to a new total of 303,000 as the labor market continued to signal strength.

Government analysts attributed the big improvement to a slowdown in layoffs in the auto industry, which had seen big increases in recent weeks as auto plants shut down temporarily to retool for the new model year.

Federal Reserve Chairman Alan Greenspan, delivering a monetary report to Congress this week, said the U.S. economy, after a brief slowdown in the spring, has picked up strength over the past two months and should enjoy solid growth this year.

Greenspan cautioned that the growth forecasts could be derailed by a variety of potential threats from a surge in energy costs to home prices that he said had reached unsustainable levels in some parts of the country.

The strong economic growth this year has helped to boost job creation. The nation’s unemployment rate has fallen to 5 percent, the lowest point in nearly four years.

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The performance of jobless claims last week was further evidence that labor markets are continuing to improve.

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The drop of 34,000 was the largest one-week improvement since a decline of 35,000 in the week of Dec. 21, 2002. The decline was more than triple the 10,000 drop that private analysts had been predicting.

The total of 303,000 claims last week was the lowest level in 16 weeks. The four-week moving average, which helps smooth out weekly volatility, also declined last week to 318,000, the lowest level in more than four months.