2 economic threats lessen a bit

September 17, 2010 at 12:00a.m.

Associated Press

WASHINGTON

The economy may have a long way to go, but at least two big threats are fading.

Economists are less worried that the U.S. will experience another round of mass layoffs and its first bout of deflation since the 1930s after the release of two government reports Thursday.

The third drop in jobless claims in four weeks and a mild uptick in wholesale prices in August add to evidence that a second recession is unlikely.

Concerns about another downturn intensified last month when jobless claims spiked past the half-million mark. Wholesale prices, meanwhile, fell in early summer for three-straight months. But those trends have, for now, reversed themselves, leaving an economy that still is growing but at a pace too slow to create many jobs.

First-time applications for jobless benefits fell by 3,000 to a seasonally adjusted 450,000 last week, the lowest level in two months, the Labor Department said Thursday.

Despite the drop, initial claims for unemployment benefits are above levels that would signal a hiring boom. In a healthy economy, claims usually fall below 400,000.

And some companies still are letting go of workers — FedEx announced Thursday it would be cutting 1,700 jobs.

Still, applications for unemployment benefits have dropped nearly 11 percent in the past month.

Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi UFJ, said last month’s spike in claims was a “false alarm.”

“The labor markets are stable, and companies are not increasing layoffs,” he said in a note to clients.