Jobless claims drop to new low; prices steady

WASHINGTON --- New jobless claims dropped to the lowest level since January and the prices of many household goods stayed low last month, signs of stability for the fledgling economic recovery.

The decline in jobless claims shows companies are cutting fewer workers, though the drop isn't yet steep enough to signal new hiring, economists said. And the low level of inflation is holding down prices as Americans slowly regain their appetite to shop despite rising unemployment and tight credit conditions.

Thursday's reports "all point to an economy that is starting to grow again," said Bernard Baumohl, chief global economist at the Economic Outlook Group.

Low inflation is consistent with the early stages of an economic recovery, Mr. Baumohl said. Even as business activity picks up, unemployment is still high and factories have enough spare capacity to increase output without sending prices higher.

The Labor Department said first-time claims for jobless benefits dropped to a seasonally adjusted 514,000 from an upwardly revised 524,000 the previous week. The fifth decline in six weeks defied economists' forecasts of a slight gain.

Employers have eliminated a net total of 7.2 million jobs since the recession began in December 2007, sending the unemployment rate to a 26-year high of 9.8 percent last month when 263,000 jobs were lost.

In a separate report, the Labor Department said consumer prices rose 0.2 percent last month, matching analysts' expectations. Prices excluding the volatile energy and food categories also rose 0.2 percent.

Over the past 12 months, consumer prices fell 1.3 percent, as the recession kept a lid on inflation.

Excluding food and energy, prices rose 1.5 percent.