Jobless Claims Fall to 376,000

As the Labor Department reported a 15,000 drop in the number of first-time unemployment benefit filings Thursday, a debate erupted over whether the Federal Reserve should follow up 11 cuts in short-term interest rates with an increase.

The trucking industry is sensitive to fluctuations in the economy, which can trigger demand for freight service.

Last week's drop in unemployment filings, to 376,000, marked the fifth consecutive week the figure was below 400,000. The last time there was a stretch this long of sub-400,000 initial claims was between March and April 2001, at the very beginning of the current recession.

The four-week moving average for initial claims also fell, by 5,750 to 380,500. The four-week average smoothes out changes in the initial jobless figure, making it less volatile.

Bill Gross, who manages the $240 billion Pimco Total Return Fund at Pacific Investment Management Co., said that the 11 cuts the Fed made in 2001 have failed to lower long-term borrowing costs, and that the Fed should now raise rates, Bloomberg reported.

Gross said the Fed, which only controls its target for overnight bank loans, needs to find a way to bring down home mortgage and corporate borrowing costs to ensure an economic recovery.

Boosting short-term rates would be a 'masterstroke' that would cut demand for two- to five-year government notes and increase purchases of 10- to 30-year debt, Gross told Bloomberg.

owever, Paul Kasriel, chief economist at Northern Trust Securities in Chicago, disagreed, telling Bloomberg that raising Fed funds may reduce long-term rates with side effects that may be worse.

It could also discourage banks from making loans, which would be a drag on growth, he said.