WASHINGTON, 17 October 2003 — The US economic recovery is picking up steam, according to government reports yesterday, indicating the job market is improving and the troubled factory sector is turning around.

US industrial production rose in September, the Federal Reserve said, as factory output posted its biggest gain since April 2000.

The number of Americans filing an initial claim for jobless benefits fell last week to the lowest level since early February, the Labor Department said, a hopeful sign for job seekers. Another report showed inflation outside the energy sector remains low.

“We’ve been really encouraged by the strength of the economic numbers over the past week. Today’s numbers really confirm that the recovery is in full swing,” said Scott Anderson, senior economist at Wells Fargo.

The Fed said production increased 0.4 percent after a revised 0.1 percent decline in August. Firms operated at 74.7 percent of capacity, their fastest pace since March.

In a sign the manufacturing sector is rebounding, factory production — which makes up more than four-fifths of total industrial output — rose by 0.7 percent, the largest gain since April 2000. Much of that jump could be traced to a hefty 6.6 percent increase in production of autos and parts. US factories have shed 2.8 million jobs in the last three years, but there are signs the employment market, which has lagged other areas of the economy, is showing signs of recovery from the 2001 recession.

The data supports an anecdotal snapshot of economic conditions across the country from the Federal Reserve on Wednesday. The so-called “beige book” said the US recovery gained speed in recent weeks as consumer spending strengthened and manufacturing activity picked up.

Most analysts expect the Fed to hold interest rates steady until it is certain the economic rebound has taken hold and created a sustained recovery in employment.

The Labor Department said first-time filings for state unemployment aid fell 4,000 last week to 384,000 from the previous week, the Labor Department said. The number was broadly in line with analysts’ expectations that claims would be 388,000.

It was the second week in a row that claims came in under 400,000. Economists say claims above 400,000 suggest a deteriorating jobs market.

The drop also brought a decline in the closely watched four-week moving average of initial filings, seen as more reliable because it irons out weekly fluctuations.

The department said the average fell 4,250 to 390,750, also the lowest since early February. While the report suggested layoffs are slowing, it also showed unemployed workers are still having a tough time finding new jobs. For the week ended Oct. 4, the number of Americans claiming benefits after filing an initial claim climbed 58,000 to 3.67 million. The labor market has lagged other areas of the economy. But recent reports have been encouraging for job seekers. In September, the economy created 57,000 new jobs, the first increase in eight months.