Cautious good news on the US Job front.

In an optimistic development new claims for unemployment benefits in the United States fell more than expected last week. That is to say that 12,000 fewer people or only 367,000 people filed initial claims for state unemployment benefits. This continues a general slowing of the rate at which people are being laid off and may mean that businesses are finally at a point where they have fewer superfluous staff and a step up in hiring may be around the corner. Economists see the 400,000 mark for initial filing of unemployment benefits as the dividing line between an improving and deteriorating labor market, as the four week moving average has been at 375,750 this is another positive indication.

Job growth has gained momentum and the unemployment rate is at a three year low of 8.5 percent as of December 2011. The number of people receiving benefits under regular state programs is at 3.437 million for the week ending January 21; this is the lowest it has been since September 2008. A separate Labor Department report shows that growth productivity in U.S. nonfarm productivity slowed in the fourth quarter, this is another indicator that current staff is working at maximum productivity and an uptake in demand may lead to hiring.

The Fed for its part is cautiously optimistic and feels that though there has been some improvement in the labor market, too many people are still without jobs. The Fed is likely to keep overnight lending rates near Zero till late 2014 and the forecast is that unemployment will end this year between 8.2 and 8.5 percent. Another reason for caution is the woeful sate of the European economy as it struggles with the sovereign debt crisis and the potential effect it will have on businesses around the world and in the U.S. Federal Reserve Chairman Ben Bernanke while speaking to U.S. lawmakers pledged that the Fed would do all it could to prevent a spillover effect from the European crisis, which he felt threatened the U.S. recovery.

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