Record exports in April tempered fears that the economic recovery was running off the rails, even though first-time claims for jobless benefits edged higher last week.
A Commerce Department report on Thursday showed the U.S. trade deficit narrowed unexpectedly in April as exports hit a new high and imports from Japan tumbled more than 25 percent after its earthquake, tsunami and nuclear disaster.
The trade gap narrowed 6.7 percent from March to $43.7 billion even though oil prices hit their highest level since September 2008. The data suggested stronger second-quarter economic growth than economists had expected.
A lot of forecasters, ourselves included, had lowered expectations for the second quarter, and this will reverse some of that reduction in expectations, said David Resler, chief U.S. economist at Nomura Securities International in New York.
Oil prices slid in May from April peaks but are creeping higher again after the Organization of the Petroleum Exporting Countries on Wednesday failed to agree to increase production.
A second report from the Labor Department showed the number of Americans filing new claims for unemployment aid unexpectedly edged higher last week, reinforcing a view that the job market recovery has stalled.
Initial claims for state jobless benefits increased 1,000 to 427,000. Economists had forecast claims to drop.
First-time claims have now been perched above the 400,000 mark for nine weeks in a row. Analysts normally associate a level below that with steady job growth.
It's the same dismal trend continuing. It's not getting worse, but it's not getting better either, said Keith Hembre, chief economist at Nuveen Asset Management in Minneapolis.
U.S. Treasury yields dipped to six-month lows as traders saw the claims reports as fresh evidence the economic recovery was stumbling. But stocks were up 1 percent, cheered by the narrower trade deficit.
A report on Friday showed the U.S. unemployment rate ticked up to 9.1 percent in May while nonfarm employers added a paltry 54,000 workers to their payrolls. The report was the latest and most stark sign of economic weakness.
Hembre said the unemployment rate could rise to 9.2 percent in the June report. That would add to President Barack Obama's political woes heading into the 2012 race for the White House.
Federal Reserve Chairman Ben Bernanke on Tuesday acknowledged the economy had slowed but offered no hint the central bank was considering more stimulus to boost growth.
Veteran economist Robert Shiller said recent housing and employment data suggested the U.S. economy was at a tipping point where a double-dip recession was possible.
A glut of unsold homes and a large number of homeowners under water on their mortgages are pressuring prices, which conceivably could fall another 10 to 25 percent, he said.
JAPAN SUPPLY DISRUPTIONS
U.S. exports, buoyed by a weakening of the U.S. dollar, rose 1.3 percent to an all-time high of $175.6 billion.
Imports from Japan dropped $3 billion, the largest amount on record. U.S. auto and auto parts imports from Japan and other suppliers fell $2.8 billion, partly reflecting supply chain disruptions in the aftermath of the triple disaster.
Once those problems are worked through, many analysts expect the trade gap to widen again.
Right now (the trade report) looks like it's going to be positive for Q2 GDP, but by the end of June the bounce back will be obvious I think, said Thomas Simons, money market economist for Jefferies & Co in New York.
The closely watched U.S. trade deficit with China jumped nearly 20 percent in April to $21.6 billion. It continues at a pace to exceed last year's record of about $273 billion.
A separate Commerce Department report showed U.S. wholesale inventories rose a less-than-expected 0.8 percent in April, as automotive stocks fell the most since December 2009.
The trade gap narrowed despite the biggest month-to-month jump in prices for imported oil in nearly three years. The average price rose to $103.18 per barrel, the highest since September 2008.
However, the volume of crude oil imports fell by more than 1 million barrels a day after rising nearly that much in March, pushing the overall U.S. oil import bill lower.
That, combined with the lower imports from Japan, helped trim total imports by 0.4 percent to $219.2 billion, even as imports of foods, feeds and beverages set a record.
Strong U.S. demand for imported capital goods, consumer goods and industrial supplies suggest U.S. economic growth should continue to muddle along, accelerating in the latter part of this year, said Gregory Daco, principal U.S. economist at IHS Global Insight.
(Additional reporting by Lisa Lambert in Washington and Leah Schnurr, Richard Leong, Karen Brettel and Rodrigo Campos in New York; Editing by Andrea Ricci)