Nation roundup for February 15

WASHINGTON (AP) — The outlook for the U.S. job market is brightening after a government report showed a sharp drop in the number of Americans applying for unemployment benefits.

Weekly applications fell 27,000 to a seasonally adjusted 341,000, the Labor Department said Thursday. Outside a few weeks last month affected by seasonal distortions, that’s the lowest level in nearly five years.

The four-week average, which smooths week-to-week fluctuations, stayed near a five-year low.

Economists were encouraged by the decline but want to see the progress sustained and more jobs created. Since the recession ended in June 2009, the job market has shown brief bursts of improvement in the winter months only to falter in the spring.

In addition, the huge snowstorm that affected the Northeastern states over the weekend could push up applications in the coming weeks. The latest report covered the week ended Feb. 9, prior to when the storm hit.

“This is tentatively a positive signal for the labor market,” Daniel Silver, an economist at JPMorgan Chase, said in a note to clients.

Falling applications signal fewer layoffs. More hiring usually follows, but not always.

Since November, the four-week average has declined 5 percent to 352,500 applications. And job growth has increased to an average of 200,000 net positions a month from November through January, up from 150,000 in the previous three months.

But the employment report measures net job gains, which equals total hiring minus layoffs, quits and other separations.

A decline in layoffs can boost net job gains even when total hiring is flat or down. A separate Labor Department report earlier this week showed that layoffs fell to a 10-year low in December. Overall hiring, however, also declined.

Many companies may be more cautious about hiring now that a 2 percentage point increase in Social Security taxes is cutting consumers’ take-home pay. That could slow growth.

Still, if applications remain consistently below 350,000, net job growth should increase, said Carl Riccadonna, an economist at Deutsche Bank. Monthly gains could rise to an average of 225,000 per month, he added.

Gains at that level should steadily lower the still-high unemployment rate, which ticked up to 7.9 percent in January from 7.8 percent in December.

Economists expect the rate will decline if hiring continues at last year’s monthly pace of 180,000. The rate fell 0.7 percentage points in 2012.

The number of people receiving benefits has increased. More than 5.9 million people received benefits in the week ended Jan. 26, the latest data available. That was about 325,000 more than the previous week.

The economy contracted at an annual rate of 0.1 percent in the October-December quarter, hurt by a sharp cut in defense spending, fewer exports and sluggish growth in company stockpiles. That’s much slower than the 3.1 percent growth recorded in the July-September period.

Still, economists expect that figure will be revised in the coming months to show a small increase, after more data about last quarter has been reported. Economists at Barclays Capital estimate the economy expanded 0.5 percent in the fourth quarter.

Growth will likely pick up a bit in the January-March quarter to an annual rate of 1.5 percent, analysts forecast. That’s better than the fourth quarter but below last year’s expansion of 2.2 percent.

The mother of an Alabama boy held for days in an underground bunker said in an interview broadcast Wednesday that she forgave her son’s captor early in the standoff and asked authorities not to harm him.

Jennifer Kirkland’s son, Ethan Gilman, was a captive for six days in rural Midland City, Ala., before FBI agents entered the bunker and killed 65-year-old Jimmy Lee Dykes.

Dykes “took care of Ethan to the best of his abilities” by cooking chicken for the boy and asking hostage negotiators to bring the child his favorite toy car, his mother told Dr. Phil McGraw in an interview for the “Dr. Phil Show.”

“From the very beginning I had already forgiven Mr. Dykes, even though he still had my child,” Kirkland said. “…I asked that he not be hurt. But if it came down to it, you know, of course I want my child safe.”

Authorities returned Ethan unharmed after a gunbattle in which Dykes, according to a coroner, was shot multiple times. Kirkland said her son, who turned 6 just two days after the rescue, told her that he witnessed the shooting.

Members of the rescue team used stun grenades to disorient Dykes, who had a gun and had become agitated with negotiators, before rushing into the bunker, she said.

“They went in and covered Ethan with a vest and they shot Mr. Dykes,” Kirkland said.

Ethan saw the agents kill his captor, his mother said, just as days earlier he had witnessed Dykes storm onto his school bus and fatally shoot the driver, Charles Albert Poland Jr.

Poland and Ethan had become close, Kirkland said, as the driver had helped the boy work up the courage to get off the bus by himself.

“Ethan has always been scared of coming down the bus steps,” Kirkland said. “And Mr. Poland would always cheer him on, you know, ‘Come on, little buddy, you can do it.’”

Ethan typically sat right behind Poland on the school bus, where the driver could keep an eye on him, Kirkland said.

That’s where the boy was sitting the day police say Dykes came aboard the bus armed with a gun and demanding two hostages. Authorities say Poland was shot trying to stand between Dykes and the children.

“The reason I think Ethan was taken off the bus is because when he saw Mr. Poland shot, Ethan passed out,” Kirkland said. “Mr. Dykes went down to catch him and he picked him up. And I think, in his own way, he was trying to care for him.”

After the shooting, authorities say, Dykes fled to the bunker with the child as the standoff opened.

NEW YORK (AP) — Renewed worries about Europe overshadowed an encouraging U.S. jobs report on Thursday, leaving major stock indexes roughly where they started.

Germany’s economy shrank more than expected late last year, and the slowdown in Europe’s largest economy deepened the region’s ongoing recession. That’s a troubling sign for the U.S., because sales to Europe have been a boon for American companies.

The Dow Jones industrial average fell 9.52 points to close at 13,973.39.

After a strong start, the stock market has drifted sideways over the previous week with few major events to sway investors. That calm could disappear soon, said Doug Cote, chief market strategist at ING U.S. Investment Management.

With recessions in Europe and Japan, and weak growth in the U.S., he’s bracing for some turbulence. “Everybody is too complacent,” Cote said.

Cisco Systems fell 1 percent. The world’s largest maker of computer networking equipment reported earnings late Wednesday that surpassed Wall Street’s expectations, but the company predicted sales growth that was weaker than previous estimates. Cisco’s stock lost 15 cents to $20.99.

The Standard & Poor’s 500 index edged up 1.05 to 1,521.38. The Nasdaq composite index rose 1.78 to 3,198.66.

The S&P 500 index has climbed 1.6 percent this month and has already gained 6.7 percent for the year.

The number of people applying for unemployment benefits fell to 341,000 last week, the lowest level in three weeks, according to the Labor Department. Besides a few weeks last month affected by seasonal trends, that’s the lowest level in nearly five years.

Among the many deals announced Thursday, American Airlines and U.S. Airways agreed to merge, creating the country’s largest airline. Warren Buffett and 3G Capital, a private-equity firm, also plan to buy the ketchup maker H.J. Heinz for $23 billion. US Airways sank 67 cents to $13.99, while H.J. Heinz soared $12.02 to $72.41.

Constellation Brands soared 37 percent, the biggest gain in the S&P 500, after reaching a deal with Anheuser-Busch InBev. InBev agreed to sell a brewery in Mexico and rights for Corona and Modelo beer in the U.S. to Constellation for $2.9 billion. Constellation Brands gained $11.87 to $43.75.