Jobless claims match 19-month low

Economists surveyed by Briefing.com expected new claims to dip to 440,000 in the week. The number of new claims matches the level reached in the Feb. 6 week, which was the lowest point since the week ended Aug. 23, 2008.

The Labor Department also tracks the 4-week moving average of initial claims, which smoothes out volatility in the measure. That number was 447,250 for the week, down 6,750 from the previous week's downwardly revised average of 454,000.

"We saw a nice little drop of 6,000, which is consistent with our expectations of slow improvement [in the jobs market]," said Robert Dye, senior economist for PNC Financial Services Group.

The report also said that 4,662,000 people filed continuing claims in the week ended March 20, the most recent data available. That figure, the lowest level since Dec. 20, 2008, was down 6,000 from the preceding week's 4,668,000 claims, but higher than the 4.62 million economists expected, according to Briefing.com.

The 4-week moving average for continuing claims was 4,679,500, a decrease of 12,500 from the preceding week's revised average of 4,692,000.

Continuing claims data excludes people whose benefits expired or those who have moved to state or federal extensions. It reflects those filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks.

Continuing claims will be "the ongoing hangover effect of the recession," said Dye. "It's going to take a long time to absorb that slack in the labor market, even if we see moderate job creation."

Jobs outlook still unclear

President Obama and lawmakers in the House and Senate continue to push for more relief. In March, the deadline to file for unemployment insurance was extended and the president signed into law a number of tax breaks for businesses.

The measures are part of the effort by Congress to spark job growth and bring down the national unemployment rate, which stands at 9.7%.

0:00/1:34What's in the overdue jobs bill?

Dye says job growth measures could be stifled by continuing claims, which will come down "grudgingly slow" and keep unemployment within the 9% to 9.5% range.

Jobless claims fell the most in California, with a decline of 5,180, primarily due to fewer layoffs in the construction industry. Pennsylvania and North Carolina also were among the top 3 states that had the largest declines in new claims.

Illinois, Oklahoma, and Missouri topped the list of increases in initial claims.

The report came ahead of Friday's much anticipated non-farm payrolls figures for March. Economists surveyed by Briefing.com expect an increase of 190,000 jobs, many of them temporary Census-related positions instead of full-time growth in the private sector.

"The proof in the pudding is going to be what kinds of gains we're going to see in the private sector," said Dye. "What we need to see is the economy making a transition from a government-aided recovery to a self-sustaining economy."  

Jobless claims reflect weak recoveryUnemployment claims show long-term problem

Higher taxes threaten stock rally

By 2013, investment taxes for the wealthiest Americans will rise to roughly 24% from the current level of 15% -- the highest level since the Reagan era. The tax applies to roughly 1 million individuals who earn over $200,000 and 4 million couples who rake in more than $250,000.

While this group makes up just 2% of the population, it's a far bigger driver of market activity than the other 98%. In addition, the higher rates aren't tied to inflation, meaning middle-class Americans will eventually price into the group.

On the plus side, the tax hikes are spread out over several years and are just one of many factors that influence stock values, suggesting the impact on the broad market will be moderate.

In fact, markets have been known to thrive in a higher investment tax rate environment. From 1986 until 1997, when the top capital gains tax rate was at 28%, the Dow gained in all but one year, with average returns of 15%.

But this time around, the psychological impact may play a bigger role. With the U.S. economy still reeling in the aftermath of the worst recession since the 1930s, investors have more reason to show caution in the near term.

"You'll probably see more of a sideways pattern in the stock market over the next few years, but it's a little muddy as to how the higher taxes might factor in," said Linda Duessel, equity market strategist at Federated Investors.

Bracing for the tax hikes

With some of the 2003 tax cuts expiring at the end of this year, wealthy Americans will likely see a boost in long-term capital gains taxes to 20% from 15%. Starting in 2013, they'll also pay additional Medicare taxes - an extra 0.9% of their wage income and an extra 3.8% on investment income.

Duessel said that the government was giving investors time to first absorb the end of the Bush tax cuts before the Medicare tax kicks in, which should ease the blow. Additionally, tax policy could change after the mid-term elections.

The taxes would hit those whose gross income, which comprises earnings plus investments, tops $200,000 for individuals and $250,000 for couples. Investment income, also known as unearned income, refers to capital gains, dividends, interest, annuities and rent, among other things.

"Anytime you raise taxes, you provide some incentive to sell the underlying stocks, but I don't think these will have a big impact," said Douglas Elliott, fellow at the Brookings Institute and a former investment banker at JPMorgan Chase.

He said that's partly because the tax impacts all types of investments, including both stocks and bonds, so it doesn't make one more advantageous over the other from a tax perspective.

0:00/3:09Better alternatives to 401(k)

"I think there will be some psychological impact, just like there was when capital gains tax rates came down (in 2003), but that was a short-term impact," Elliott said. "Longer term, stock returns are still driven by fundamentals."

In 2003, investors shifted assets into big caps and high dividend paying stocks after President Bush lowered the capital gains taxes.

Following that logic, Duessel said higher taxes should theoretically hurt the higher dividend paying stocks because high-income investors tend to bail out of those areas and move into tax-free areas like municipal bonds when capital gains taxes go up. Dividends have historically accounted for nearly 40% of investors' total returns.

However, the pressure on dividend-paying blue chips could be contained this time since those stocks haven't kept up with the pace of the rally that boosted the S&P 500 73% off 12-year lows hit in March of 2009.

Frontier Communications (FTR) pays one of the largest dividends in the S&P 500 index, yielding 13.4%. Its stock price is up 38% from the March 2009 lows. Dow component AT&T (T, Fortune 500) is another of the S&P 500's biggest dividend payers, with a yield of 6.5%. But the stock price has risen just 18% off the March lows.

While tax-free municipal bonds may offer more competitive yields than cash or Treasurys, they also provide greater risks that come with lending to hard-hit city and state agencies.

Tax hikes crimp savings

Some analysts are more concerned about the impact of higher taxes on savings and corporate profits.

For many investors, the rally over the last 12 months only served to cut or erase the losses they racked up in 2008's bloodletting. Having only just recovered some or all of their holdings, investors may see the threat of higher taxes as a catalyst to bail, said Ken Grant, partner at Waterstone Private Wealth Management.

"If you're thinking of selling and you know you're going to see a tax of 20% in 2011 and 15% in 2010, you're going to sell ahead of the higher rate that's coming," Grant said.

Tussle over health care law impact on companies

But for investors with a longer-term focus, ditching stock holdings for tax reasons doesn't make a lot of sense when bonds, cash and cash equivalents offer little in the way of competitive yields, he said.

The higher tax rates are more likely to impact individual stocks, as investors demand higher price-to-earnings valuations now that their after-tax rate of return will be lower. This could put pressure on companies that are already expecting to take charges related to other requirements of the new law.

But the higher taxes are not likely to change market participants' broad investing habits or dramatically impact the way they value companies, said Ashfield Capital's Hill. "From a long-term perspective, it slows investment growth, but it doesn't cut overall investing."  

Stock market on best roll since ‘07The bottom line on Medicare tax hikes

Job cuts surge 61% - Challenger

"Unfortunately, many people are still jobless and many businesses still shuttered," said John Challenger, chief executive officer of the firm, in a statement. "This combination is having a significant negative impact on state and local tax revenues and, in turn, leading to continued downsizing in this sector."

Government job cuts led March's surge, accounting for nearly 75% of the total jobs shed. Year to date, government job losses have made up about a third of all announced cuts.

There were 50,604 announced government job cuts in March, and the United States Postal Service alone plans to reduce its workforce by 30,000 workers this year through retirement and attrition. The rest of the government jobs will be shed by state and local agencies suffering from budget shortfalls.

Get a job, keep a job

But overall the trend was still positive. March job cuts were down 55% from the same month a year ago, when 150,411 cuts were announced.

In the first quarter of 2010, a total of 181,183 job cuts were announced, the lowest first quarter total since 2000 and down 69% from the first quarter of 2009.

A separate report Wednesday from payroll processor ADP showed that private-sector employers cut payrolls by 23,000 jobs in March, marking the smallest monthly decline since February 2008. ADP's report does not include government jobs.

The report sets the stage for the highly anticipated monthly jobs report from the government due Friday. The Labor Department is expected to show a gain of 190,000 jobs in March, compared to the 36,000 lost in February. Economists forecast the unemployment rate will remain unchanged at 9.7%. 

Employers still skittish on hiringSpending growth hints at economic ‘revival’

Offshore drilling: Impact on Americans

All experts agree any real impact is a long way off. While the first new Atlantic offshore oil and gas lease sale in some 20 years is slated to take place, putting drilling some 50 miles off the Virginia coast next year, it'll take 4 to 12 years to see any impact in domestic fuel production, according to government analysts.

Pocketbook: Despite the momentum that built for offshore drilling back in 2008, when gas prices rose above $4 a gallon, increasing domestic production isn't expected to impact gas prices all that much.

In fact, before he joined the Obama administration, assistant secretary of energy David Sandalow told some publications that "Drilling offshore to lower oil prices is like walking an extra 20 feet per day to lose weight."

Nobody really knows how much oil is beneath the nation's outer continental shelf or the rest of the Gulf of Mexico.

"I'm ready to drill on the offshore, I have no problem with that," energy magnate T. Boone Pickens told CNN chief business correspondent Ali Velshi on "CNN Newsroom." "But don't look for big reserves off the East Coast of the United States."

The Interior Department's Minerals Management Service suggests that 39 to 63 billion barrels of oil could be "recoverable" from the new areas that would be made available for drilling. At 2008 consumption levels, that would be enough to exclusively meet the U.S. thirst for oil for 5 to 8 years, according to the Department of Energy.

In the broader scheme of global production and consumption, future U.S. production is considered on the small side.

President Obama acknowledges that drilling, alone, is not a panacea for all the nation's energy problems.

"I want to emphasize is that this announcement is part of a broader strategy that will move us from an economy that runs on fossil fuels and foreign oil to one that relies more on homegrown fuels and clean energy," Obama said. "The only way this transition will succeed is if it strengthens our economy in the short term and long term."

Jobs: But in the area of job creation, experts agree it could have a big impact, especially in terms of creating higher-paying jobs.

Again, estimates depend on the number of new rigs created. But it could lead to 25,000 people at work offshore, with salaries as high as $90,000, according to Michael Kearns, spokesman for the industry group National Ocean Industries Association.

"This will create jobs in the future, and this is good for business and good for people," said Anas F. Alhaji, chief economist at NGP Energy Capital Management, which supports drilling.

Although that industry already has room to grow. The oil and gas industry was hit particularly hard by a worldwide weakening in demand for oil that accompanied the recession. Oil and gas firms laid off hundreds of workers throughout the Gulf Coast."

Royalties: Another place that consumers can see an impact is through royalties. The federal government - and possibly some states if Congress agrees - could collect a portion of the revenue that comes from newly found, oil Kearns said.

That could be good news for cash-strapped states with gaping holes in the budgets. For consumers, that could mean fewer municipal programs slashed and fewer layoffs and furloughs due to budget cuts. However, such royalties aren't likely to start rolling in until after U.S. has recover from this economic recession.

Environment: Another big impact will be on the nation's shorelines. Already some lawmakers, including Sen. Frank Lautenberg, D-N.J., say they oppose the expansion plans, because it threatens their beach and coastal industries.

0:00/4:34CEO Voser on Shell's Eco-Marathon

Environmental groups say that the economic gain from drilling isn't worth damaging coast lines. They say more rigs, especially those close to the coast such as the one in Virginia, mean more spills and leaks from oil platforms and storage systems.

"There's sort of a right way and a wrong way of providing our nation's future energy needs," said Wesley Warren, program director at National Resource Defense Council, which opposes the expansion. "The right path is one that provides economic growth while providing economic protection. The wrong path trades those two off."

--CNN senior correspondent Allan Chernoff and chief business correspondent Ali Velshi contributed to this report  

Price drop means low interest ratesConsumer prices rise 2.6%

Geithner sees 'unacceptably high' jobless rate

The comments came ahead of the government's monthly jobs report, which is due Friday. That report is expected to show that U.S. employers added 190,000 jobs in March, but the unemployment rate remaining at a persistently high 9.7%.

"It is going to take a long time to bring it down because of the damage of the recession," Geithner said of the jobless rate.

The remarks were consistent with previous administration forecasts. In a Feb. 1 report on assumptions underlying the fiscal 2011 budget, Council of Economic Advisers chairwoman Christina Romer said the unemployment rate will end the year at around 9.8%, and will reach 8.9% by the fourth quarter of next year.

Geithner, who was interviewed at a meeting of business leaders in Pittsburgh, said the financial crisis and subsequent recession of the last few years had caused a "huge amount of damage" to businesses and households.

"We're going to be living with that damage for some time," he said.

However, he stressed that President Obama has taken steps to revive economic activity and foster job growth, including a $17.6 billion bill passed earlier this month.

"It is going to take time to bring back what we lost," Geithner said. "But again, that's why he's working so hard to make sure that Congress is providing additional support for job creation, more support for small business, more support for infrastructure, more support for cities and states across the country."

--CNN senior political correspondent Candy Crowley contributed to this report.  

35 cities suffer unemployment above 15%Jobless rate high but steady at 10.7 percent

Manufacturing grows at fastest rate since 2004

"The report is very positive on all points," said Dan Meckstroth, a chief economist with the Manufacturers Alliance. "The index itself is at its best we've seen so far in this recovery, and it's up substantially since February."

The strong number was driven by significant growth in new orders and production, as well as larger inventories, which grew for the first time in 46 months.

The breakeven point for the index is 50, with a reading above that indicating growth in the sector. March's higher score means the manufacturing sector grew at a faster pace than the month before.

The monthly report surveys purchasing managers, and because it's a survey, some analysts say the index is highly subjective and overrated. But others view the report as a valuable indicator of broad trends and the overall health of the economy.

Overall, 17 of the 18 manufacturing industries surveyed showed growth. Plastics and rubber products is the only industry that reported contraction.

The new orders component rose to 61.5 from 59.5 the month before, while the production component increased to 61.1 from 58.4.

Inventories inched higher to 55.3 -- the first time that component has posted above the 50 tipping point in 46 months.

While the report's employment component slipped 1 point to 55.1 in March, that was still above the level that indicates growth.

Strong productivity gains usually come at the early stages of recovery, Meckstroth said, as new orders bounce back, manufacturers start revving up their previously underutilized machinery, and factories that may have been overstaffed start adding work hours. Job growth follows suit a bit later in the recovery, he said.

"As production picks up there's more pressure on companies to add people," Meckstroth said. "The fact that we're getting any growth in employment is very positive. It's another positive sign that the industry's recovering and will continue to recovery."

The ISM report came on the same day as separate reports showingmanufacturing activity also rose more than expected during March in both China and the United Kingdom. 

Manufacturing (ISM)Year-end economic spurt shows signs of sputtering

Job Growth

The results were still worse than the previous month, as just 26,000 jobs were lost in January, according to a revised estimate.

But there was no significant change in the number of unemployed workers, and the unemployment rate held steady at 9.7%. Economists surveyed by Briefing.com were expecting an increase to 9.8%.

The government said the winter storms that blanketed the East Coast with several feet of snow last month possibly skewed the results. The Labor Department's jobs survey was conducted in the middle of February, which coincided with blizzards that temporarily shuttered some businesses and kept many workers home without pay.

Those employees would not have been counted on the government's payroll survey if they did not get paid during that pay period.

"The jobs numbers themselves show a pretty steady improvement across most categories," said Bob Brusca, economist at FAO Economics. "Through the blizzard of jobs data, it's a lot easier to connect the dots to a positive story than to a negative story."

Brusca noted that even in sectors that are not hiring, the pace of job loss has slowed to close to the lowest level since the recession began in December 2007.

Snowed in

"The snow storms were particularly severe, hitting large-population areas the hardest right at the time of the survey," said George Corona, chief operating officer of temporary staffing firm Kelly Services. "You would expect that manufacturing and construction were negatively impacted because of the weather."

Retail, construction and factory workers were the most likely to be impacted by inclement weather, and all three sectors took a hit in February. Retailers trimmed 400 jobs after adding 41,000 positions in January. Manufacturing businesses added just 1,000 jobs, down from 20,000 new jobs the month before.

Construction continued to be one of the worst-hit sectors, cutting 64,000 jobs in February. Unemployment in the construction industry rose to a rate of 27.1%, up from 24.7% in the previous month and by far the highest rate of any sector.

The snow also likely impacted the number of workers who were seeking full-time employment but were working only part-time hours. That figure rose by nearly 400,000, pushing the so-called underemployment rate up to 16.8% from 16.5% in January.

That resulted in shorter hours for workers: The hourly work week fell by an average of 6 minutes to 33.8 hours in February. With a modest 3-cent gain in the average hourly salary, the average weekly paycheck rose by $1.01 to $759.15.

Obama administration economist Christina Romer said the snow storms likely had a "substantial" impact on February's jobs figures. In turn, she expected last month's jobs report "to be counteracted next month, as workers who temporarily disappeared from payrolls because of the snow are once again counted."

A silver lining

Despite the snow, several industries showed solid gains in employment, including health care and the service industries. Private business services created 51,000 jobs in February, the most of any sector. That's encouraging, since economists say hiring in that sector is a good measuring stick for the health of the overall labor market.

Also encouraging was the addition of 47,500 temporary workers, whose hiring often signals that employers are starting to gear up again. There have been nearly 100,000 temporary jobs created in 2010.

0:00/1:34What's in the overdue jobs bill?

In an attempt to correct the still slumping labor market, the House passed a $15 billion jobs bill on Thursday, and the Senate is expected to vote on it next week. The bill would exempt employers from Social Security payroll taxes on new hires who were unemployed; fund highway and transit programs through 2010; extend a tax break for business that spend money on capital investments, such as equipment purchases; and expand the use of the Build America Bonds program, which helps states and municipalities fund capital construction projects. 

Job GrowthTennessee’s unemployment rate won’t get much relief from jobs bill