Higher jobless claims indicate weak labor market

 @ibtimes
on June 23 2011 5:16 PM

The number of Americans filing new claims for unemployment benefits rose last week, suggesting little improvement in the labor market this month after hiring stumbled badly in May.

Initial claims for state unemployment benefits climbed by 9,000 to 429,000, the Labor Department said on Thursday. Economists had expected claims to come in at 415,000.

The claims report, which covers the survey period for the government's closely watched data on nonfarm payrolls for June, came a day after the Federal Reserve gave a downbeat assessment of the economy.

The government's employment report for June will be released on July 8. Claims for unemployment benefits increased by 15,000 between the May and June survey periods, implying another soft month for jobs after employment rose by only 54,000 in May.

The labor market remains in a funk, it doesn't seem like it has improved much this month and the rise in claims will keep expectations for June nonfarm payrolls in check, said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

The Labor Department said it estimated jobless claims for six states because of technical problems. Economists said even if claims had been overstated as a result, that would not change the view that they were too high to be consistent with either stronger economic growth or hiring.

A separate report on Thursday highlighted one of the economy's weakest spots: housing. The Commerce Department said new single-family home sales fell 2.1 percent to an annual rate of 319,000 units in May. A report on Tuesday had shown sales of previously owned homes, a larger segment of the market, fell 3.8 percent to a six-month low.

There is no sign that things are going to improve dramatically and that matches up with the economic conditions. Housing needs job growth to start to recover, said Jonathan Smoke, executive director for research at Housing IntelligencePro in Washington.

The data and economic fears sparked by an International Energy Agency decision to release emergency oil stockpiles, in a bid to drive down oil prices and spur economic growth, weighed on U.S. stocks, But equities clawed back the bulk of steep losses on news that Greece had agreed to a five-year austerity plan.

Prices for government debt rose and the dollar advanced against a basket of currencies.

SECOND HALF REVIVAL STILL EXPECTED

The jobless claims and new home sales reports were the latest in a long-running series of data to underscore the lingering weakness in the U.S. recovery.

The Federal Reserve, at the close of a two-day policy meeting on Wednesday, acknowledged the slowdown in the economy, but said it should be temporary.

The U.S. central bank cut its growth forecasts and downgraded its view of the labor market, but gave no indication of further monetary support. It confirmed it would shutter its $600 billion bond-buying program at the end of June.

Like the Fed, economists are cautiously optimistic that the recovery will regain momentum by the third quarter.

The decision to release 60 million barrels of oil from stockpiles held by industrialized oil-consuming nations, which brought oil prices down sharply, is aimed at easing the pressure on consumers and bolstering the recovery.

High gasoline prices are one of the factors that have weighed on growth. Benchmark Brent crude fell more than $8 to about $105.72 a barrel at one point on Thursday.

U.S. gasoline prices have already moved lower from their peak of $4.02 a gallon in early May, a drop analysts say should start paying a dividend for the economy in the third quarter.

Separately, the Chicago Federal Reserve's national activity index stayed in negative territory for a second straight month in May, indicating the economy continues to grow below trend.

The soft patch has a little bit further to run, probably another month or two, then we are expecting in the second half of the year ... for there to be something of a pick-up. Not a boom, but pick-up, said Leo Abruzzese, global forecasting director at the Economist Intelligence Unit in New York.

Last week's rise in initial jobless claims left them well above the 400,000 mark for an 11th consecutive week. Analysts normally associate that level with a stable labor market.

The four-week average of new jobless claims, considered a better gauge of labor market trends, was unchanged.

The number of people still receiving benefits under regular state programs after an initial week of aid in the week ended June 11 was also little changed.

(Editing by Leslie Adler)

Share this article

More News from IBT MEDIA