New Jobless Claims Fall More Than Expected To 550K
WASHINGTON — The ending of the recession is reviving global trade, increasing U.S. imports by a record amount in July and boosting foreign demand for American goods for a third straight month.
While the job market remains a long way from recovering, first-time claims for unemployment benefits fell more than expected last week, offering some cause for optimism.
The jump in imports could be a sign that U.S. consumer spending is recovering, economists said. That's good news because such spending accounts for 70 percent of economic activity.
"Domestic demand has picked up now that we have shifted from recession to recovery," Bernard Baumohl, chief economist for the Global Outlook Group, said in a note to clients.
The Obama administration is increasingly citing its $787 billion stimulus package as a critical reason the economy is turning around, even as officials acknowledge that jobs remain scarce.
The White House's Council of Economic Advisers said Thursday the administration's efforts have saved or created 1 million jobs. President Barack Obama has promised that the stimulus plan will create or save 3.5 million jobs by the end of next year.
"A full and vibrant recovery is still many months away," Obama said Wednesday night before a joint session of Congress. "But thanks to the bold and decisive action we've taken ... I can stand here with confidence and say that we have pulled this economy back from the brink."
Republican lawmakers point out that a net total of 2.4 million jobs have been lost since the stimulus legislation was signed in February. The unemployment rate is still rising and jumped to 9.7 percent in August, the highest in 26 years, from 9.4 percent the previous month.
The Commerce Department said Thursday that the trade deficit rose 16.3 percent to $32 billion in July. Economists expected an imbalance of $27.4 billion.
Imports rose 4.7 percent to $159.6 billion, the largest monthly advance on records that date to 1992 and the second consecutive gain after 10 straight declines. The rebound reflected a 21.5 percent spike in imports of autos and auto parts, partly due to increased production at U.S. auto plants owned by General Motors and Chrysler that had been slowed when the companies were struggling to emerge from bankruptcy protection.
Exports edged up 2.2 percent to $127.6 billion. It marked the third straight monthly increase, but left exports well below their record level of $164.4 billion set in July 2008.
The export gains reflected big increases in shipments of civilian aircraft, computers, industrial machinery and medical equipment.
Some economists saw the increased imports as a sign that retailers and manufacturers are rebuilding their inventories, which could lead to greater production.
"Eventually the factories have to come back online to restock the shelves," said Carl Riccadonna, senior U.S. economist at Deutsche Bank Securities, which raised its forecast for third-quarter economic growth to 3 percent from 2 percent.
American companies have been hampered by a drop in demand at home and overseas as the recession that began in the U.S. spread worldwide. However, economists hope that a rebound in global economies and further weakening in the value of the dollar will boost exports in coming months. A weaker dollar makes U.S. products less expensive overseas.
So far this year, the deficit is running at an annual rate of $355.5 billion, about half of last year's total. Economists believe the deficit will keep rising in the months ahead, reflecting stronger growth in the U.S. and rising oil prices. They expect the imbalance in 2010 will approach levels seen before the recession hit.
On the jobs front, the Labor Department said initial claims for unemployment insurance fell to a seasonally adjusted 550,000 from an upwardly revised 576,000 in the previous week. The number of people continuing to receive benefits fell by 159,000 to nearly 6.1 million, the lowest level since early April.
Still, unemployment claims remain significantly above levels associated with a healthy economy and indicate that jobs remain scarce. Weekly initial claims are generally at 325,000 or below in a growing economy. A year ago, 3.5 million people were receiving unemployment aid.
"The labor market's healing process is agonizingly slow," Joshua Shapiro, chief economist at MFR Inc., wrote in a note to clients.
A Labor Department analyst said that the jobless figures for seven states, including California and Virginia, were estimated because state governments were unable to provide data due to the holiday-shortened week. Such estimates haven't previously resulted in large revisions, the analyst said.
On Wall Street, stocks rose for the fifth day after the better-than-expected jobless claims report and an upbeat forecast from Procter & Gamble. The Dow Jones industrial average added more 80 points, and broader indices also gained.
Economists closely watch initial claims, which are considered a gauge of layoffs and an indication of companies' willingness to hire new workers.
The four-week average of claims, which smooths out fluctuations, fell by 2,750 to 570,000 last week. That's almost 90,000 below the peak for the current recession, reached in early April.
When federal emergency programs are included, the total number of jobless benefit recipients was 9.16 million people in the week that ended Aug. 22, up from 9.14 million in the previous week. Congress has added up to 53 extra weeks of benefits on top of the 26 typically provided by the states.
The Fed and many private economists predict the jobless rate will hit 10 percent by the end of this year. The recession so far has eliminated a net total of 6.9 million jobs.
More job cuts were announced this week. MEMC Electronic Materials Inc., a maker of semiconductor materials based in St. Peters, Mo., said it plans to shut two plants starting next year, eliminating about 540 jobs. Valero Energy Corp. said it will close part of an oil refinery and lay off 150 employees and 100 contract workers.
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AP Economics Writer Martin Crutsinger contributed to this report.
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CHRISTOPHER S. RUGABER | 09/10/09 04:42 PM |