New claims for unemployment benefits fell last week to touch their lowest level in more than 2-1/2 years, a sign of acceleration in job creation.

PRODUCTIVITY:

Nonfarm productivity grew as expected in the fourth quarter, but the pace is slowing, implying companies may no longer be able to wring more output from workers and will need to step-up hiring to meet rising demand.

KEY POINTS: * Initial claims for state unemployment benefits dropped 20,000 to a seasonally adjusted 368,000, the lowest since May 2008, the Labor Department said. * Economists polled by Reuters had forecast claims rising to 398,000. The prior week's figure was revised down to 388,000 from the previously reported 391,000. * The claims data falls outside the survey period for the government's closely watched employment report for February due for release on Friday. Nonfarm payrolls probably increased 185,000 after snowstorms depressed growth to a paltry 36,000 jobs in January, according to a Reuters survey. * Claims have now held below the 400,000 threshold for a second straight week. Claims below that level are widely viewed as signaling strong jobs growth and economists believe it is only a matter of time before this is reflected in the payrolls numbers.

COMMENTS:

MIKE GIBBS, MANAGING DIRECTOR, CHIEF MARKET STRATEGIST, MORGAN

KEEGAN, MEMPHIS, TENNESSEE:

As each week goes by that we're seeing claims under 400,000, we get closer to the level where we can start expecting faster job creation. These are all good numbers and they helped futures, but they (futures) were already up on falls in crude oil.

DAVID ADER, HEAD OF GOVERNMENT BOND STRATEGY, CRT CAPITAL

GROUP, STAMFORD, CONNECTICUT:

Fewer layoffs don't necessarily mean grand hiring in a given month, we caution, but clearly the improvement in the pace of weakness in labor is reflected here. And the price action reflects this to a degree with 5s and 10s the weak sector and both moving over the first level of support, 10s vs. 3.50 and 5s over 2.17+ and so we go to the next levels vs. 3.56% and 2.26%, respectively.

MATT MCCORMICK, MONEY MANAGER, BAHL & GAYNOR INC, CINCINNATI, OHIO:

This is a good number and I hope it continues. The situation is that if jobs exceed expectations, even with weather, people have to acknowledge that that is an impressive fact. But the economy is still not firing on all cylinders, and if you add high oil, the potential for a sideways market or slower recovery is relevant.

DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS:

While claims have been volatile recently the fact that the 4 week average has fallen below 400k for the first time since July 26 2008 (to 388.5k, the lowest since July 12 2008) means evidence of a labor market improvement is becoming increasingly convincing. Bad weather should no longer be a complicating factor and the Labor Dep't saw no special factors this week. Before seasonal adjustment the level fell by a larger 30k to 351k, though the presence of the Presidents Day holiday does mean that an unadjusted decline was to be expected, and makes the seasonal factors a little tricker than usual, restraining but not eliminating our optimism on the latest number.

Unemployment