US jobs picture dims

Friday June 26, 2009

WASHINGTON: Fresh signs of weakness in US job markets on Thursday underlined the strains faced by a recession-struck US economy that contracted slightly less in the first quarter than previously thought. The Labour Department said the number of US workers filing new claims for unemployment benefits last week jumped unexpectedly by 15,000 to a higher-than-forecast, seasonally-adjusted total of 627,000.

Continued claims, which gauge how many Americans were still on jobless rolls after an initial week of claims, rose 29,000 to 6.738 million in the week ended June 13, the latest period for which the data was available.

The worse-than-expected jobs data outweighed a Commerce Department report showing gross domestic product, the gauge of total output within US borders, contracted at a 5.5 percent annual rate in the first quarter instead of 5.7 percent. That followed contractions in national output of 6.3 percent in last year's fourth quarter and 0.5 percent in the third quarter. The first estimate for second-quarter US economic performance will not be available for another month.

Despite the weak tone of the data, Wall Street stock prices rose modestly in early trading, while shorter-term bond prices gained in a sign of investor caution about economic prospects. The GDP figure was the final reading for the first quarter. The Commerce Department initially said it shrank 6.1 percent, then revised that to 5.7 percent and finally to a 5.5 percent fall.

It is expected to slip again in the second quarter ending June 30, though less severely than in the first quarter. The GDP report reflected an economy still deep in recession when 2009 began. But a report by the Paris-based Organisation for Economic Co-operation and Development this week predicted the US downturn will bottom out this year and be followed by a soft recovery in 2010.

Continuing layoffs and problems in finding new jobs are shrinking incomes while weaker housing and equity markets sap wealth, making it unlikely that consumers will be able to provide much spending power. At the same time, the GDP report showed weak business investment.

Consumer spending that fuels two-thirds of US economic activity, increased only at a 1.4 percent rate instead of the 1.5 percent previously estimated. On the plus side and helping to account for the fact that GDP shrank less than first thought, the government said companies cut inventories at slightly less vigorously rate in the first quarter than it previously estimated. Business inventories declined at an $87.1 billion rate instead of $91.4 billion, meaning they subtracted less from growth.

Reflecting the weak pace of global economic activity, exports fell at a 30.6 percent rate in the first quarter instead of the 28.7 percent estimated a month ago. That was the steepest drop in foreign sales in 40 years. Imports dropped at a 36.4 percent rate, the steepest since the summer of 1947. The department said the drop in exports cut 4.16 percentage points from GDP.

Overall business investment plunged at a record 37.3 percent rate during the first quarter, while spending on homebuilding fell 38.8 percent for its biggest quarterly tumble since early 1980. Nonetheless, corporate profits grew at a 1.4 percent rate during the first quarter, slightly better than the 1.1 percent rise estimated a month ago, after falling 10.7 percent in the final three months of last year.


(Reuters)