US corporate profits fell 3.3 percent in the fourth quarter of 2007, according to government data on Wednesday that also confirmed US economic growth slowed to a meagre annual pace of 0.6 percent in same period.
A second government report showed the number of US workers filing new claims for jobless benefits fell by 9,000 last week and the number of people remaining on benefits rolls after receiving an initial week of aid also declined.
Wall Street analysts surveyed before the reports had expected only a 0.1 percent drop in corporate profits, despite a crisis in the US subprime mortgage market that has hobbled US economic growth. The drop in corporate profits was the first in a year, and the Commerce Department said profits of both financial and non-financial companies fell.
The department said non-financial company labour costs rose, but were partially offset by price increases. US Treasury debt prices extended losses after stock index futures rose in response to the drop in new jobless claims. The dollar extended gains.
"With the light volume we've been having, any sort of headline is going to move (the market) sort of quickly," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. However, "anyone who thinks we're not in a recession is living under a rock. Let's just get it over with." Profits rose just 2.6 percent for all of 2007, compared to a much-healthier 12.2 percent gain in the prior year.
The Commerce Department's third and final reading of fourth-quarter US gross domestic product, which measures total goods and services output within US borders, was unchanged at up 0.6 percent, matching expectations before the report.
The US economy grew 2.2 percent for all of last year, the slowest since 2002, the Commerce Department said, as economists were forecasting a possible recession this year. Spending on new homes plunged 25.2 percent in the fourth quarter, the biggest drop since 1981, the department said.
The housing market woes have rattled worldwide financial markets, forcing the Federal Reserve to aggressively cut its key interest rate by 3 percentage points since mid-September.
The gloomy economic news continued into this year with data on Wednesday showing sales of new US single-family homes fell to the slowest pace in 13 years while orders for durable goods tumbled unexpectedly last month. The personal consumption expenditures price index excluding food and energy - the Fed's favoured inflation gauge - increased 2.5 percent in fourth quarter, compared with the previous estimate of up 2.7 percent.
JOBLESS CLAIMS DOWN: The number of US workers filing new claims for jobless benefits fell by 9,000 last week, the government said on Thursday, though a more reliable gauge of layoff trends rose to its highest in more than two years.
Initial claims for state unemployment insurance benefits fell to 366,000 in the week ended March 22 from a revised 375,000 for the prior week, the Labour Department said. The four-week average of new jobless claims, which is considered a more accurate measurement of employment trends since it smooths out weekly volatility, rose to 358,000 in the week ended March 22 from 356,250 in the previous week.
The weekly claims numbers came in higher than the 365,000 that private economists had forecast. The department originally reported claims at 378,000 for the week ended March 15. The four-week moving average of new claims rose to its highest since October 22, 2005, which was in the aftermath of Hurricane Katrina.
A separate report on Thursday showed that fourth quarter gross domestic product met expectations of a 0.6 percent annual growth rate. The US dollar extended gains and Treasury prices fell to session lows after the data. Futures prices indicated US stocks would open higher.
The number of people remaining on the benefit rolls after drawing an initial week of aid fell 5,000 to 2.85 million in the week ended March 15, the latest period for which figures were available. Wall Street economists forecast 2.87 million so-called continued claims. The Labour Department also on Thursday released annual seasonal revisions that went back five years.
NEWSPAPER HELP-WANTED ADS EASE: The number of help-wanted ads in US newspapers slipped in February as economic weakness has slowed job growth, a private research group said on Thursday.
The Conference Board said its gauge measuring help-wanted ad volume slipped to 21 from 22 in January, which was revised up from the original 21. The index was 30 a year earlier. "More regions of the country are experiencing economic distress and the impact is now evident in the labour markets," said Ken Goldstein, labour economist at the Conference Board, in a statement.
"There's been very little profit growth, and virtually no job growth in the past three months," Goldstein said. Help-wanted ads have declined in seven of the nine US regions tracked in the last three months, with the steepest decrease in the East South Central. The ads in that region decreased 12.5 percent. The research firm surveys help-wanted ad volume in 51 newspapers across the United States each month.