WRAPUP 3-US jobless claims fall, inflation stays benign

* Jobless claims fall in sign of improvement

* Producer prices jump, but ex-food and energy index muted

* Consumer food cost rise largest since Jan 1984

* Homes sales rise in March, home prices fall in Feb
(Adds details, home prices, graphics)

By Lucia Mutikani

WASHINGTON, April 22 (BestGrowthStock) – The number of U.S. workers
filing new claims for jobless aid fell last week as the labor
market gradually heals and producer price data showed inflation
remained muted despite a surge in food costs last month.

A rise in sales of previously owned homes in March after
three months of declines added to growing optimism about a
moderate economic recovery.

The data on Thursday should help persuade the Federal
Reserve to renew its pledge to keep benchmark interest rate
exceptionally low for an extended period at its regular two-day
meeting next week, analysts said.

“Inflation is still not an issue that the Fed is concerned
about and the job market is very slowly improving, which is an
underpinning for moderate economic growth being sustained,”
said Stuart Hoffman, chief economist for PNC Financial Services
in Pittsburgh.

Initial claims for state unemployment benefits dropped
24,000 to a seasonally adjusted 456,000, the Labor Department
said, resuming a downward trend that had been interrupted by
the Easter holiday. Markets had expected 455,000.

The data covered the survey period for the government’s
closely monitored employment report for April, which will be
released on May 7.

In a second report, the department said prices paid at the
farm and factory gate increased 0.7 percent following a 0.6
percent drop in February on strong food and gasoline costs.
Markets had expected producer prices to rise 0.4 percent.

The data had little impact on U.S. financial markets, which
were watching developments in Greece after European Union
figures showed a bigger budget deficit than previously feared.
Moody’s Investors Services downgraded Greek government debt.

The Greek news helped pull U.S. stocks (Read more about the stock market today. ) down, while
government debt prices rose modestly. The U.S. dollar hit a
one-year high against the euro.

EMPLOYMENT SLOWLY RISING

While initial claims are still above levels viewed by
analysts as in line with job market stability, anecdotal
evidence indicates employment is slowly rising.

Last month, the economy recorded its largest jobs gain in
three years, largely driven by private sector hiring as
employers started to warm up to the economy’s recovery.

Analysts expect the hiring trend continued in April, also
supported by recruitment for the 2010 census.

“The labor market is healing and we expect a healthy gain
in payrolls in April, even outside of census hiring,” said
Michelle Meyer, an economist at Barclays Capital in New York.

With the labor market recovery not expected to be vigorous
enough to absorb the 8.2 million Americans who lost their jobs
during the recession, producers will find it difficult to pass
on high prices to consumers.

The Labor Department said 70 percent of the increase in
wholesale prices in March was due to a 2.4 percent jump in
consumer foods, the largest rise since January 1984. Gasoline
prices rose 2.1 percent from a 7.4 percent fall in February.

Still, inflation pressures remain benign. Stripping out
volatile food and energy costs, core producer prices gained 0.1
percent in March after rising by the same margin in February.

Government data last week showed consumer prices barely
increased in March. A combination of benign inflation pressures
and resource slack in the economy support the U.S. central
bank’s commitment to low interest rates.

EXISTING HOME SALES JUMP

In a separate report, sales of previously owned home rose
6.8 percent to an annual rate of 5.35 million units in March as
Americans rushed to take advantage of a tax credit for home
buyers, the National Association of Realtors said.

Prospective buyers have to sign contracts by the end of
this month and close by the end of June to be eligible for the
tax break. This could see sales decline thereafter.

A housing market collapse triggered the most brutal
recession in 70 years, and housing recovery had stalled in
recent months.

“There will undoubtedly be a temporary lull in demand after
June, but if job growth continues to pick up and wage and
income gains continue to accelerate, then housing demand may be
well supported in the second half of this year,” said Omair
Sharif, an economist at RBS in Stamford, Connecticut.

With a wave of foreclosed properties hitting the market,
U.S. home prices fell 0.2 percent on a seasonally adjusted
basis in February and dropped 3.4 percent in the year, a
report from the Federal Housing Finance Agency showed.
See [ID:nWNA9173].

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Continuing claims graphic: http://link.reuters.com/caw88j
Producer prices graphic: http://link.reuters.com/zuv88j
Existing home sales graphic: http://link.reuters.com/xaz88j
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(Additional reporting by Pedro da Costa in Washington and
Lynn Adler in New York; Editing by Kenneth Barry)

WRAPUP 3-US jobless claims fall, inflation stays benign