Tags: Jobless | Claims | us | economy | recovery | productivity | Slow

Recovery Stalls as Jobless Claims Hit 8-Month High, Productivity Slows

Thursday, 05 May 2011 10:20 AM

The number of Americans filing for jobless benefits rose to an eight-month high last week and productivity growth slowed in the first quarter, clouding the outlook for an economy that is struggling to gain speed.

Initial claims for state unemployment benefits rose 43,000 to a seasonally adjusted 474,000, the highest since mid-August, the Labor Department said on Thursday.

Claims were pushed up by factors ranging from spring break layoffs to the introduction of an emergency benefits program.

Economists had expected claims to fall to 410,000.

A second report from the department showed nonfarm productivity increased at a 1.6 percent annual rate, braking from a 2.9 percent pace in the fourth quarter. The growth pace was above economists' expectations for 1 percent.

"I think we're in a situation where the markets and the Fed have been too optimistic," said Bob Andres, chief investment strategist and economist at Merion Wealth Partners in Berwyn, Pennsylvania.

"I don't think we're going to fall off a cliff but the road to real recovery and full unemployment is going to take a long time, and people ought to get back into that mode."

U.S. stock index futures extended losses after the jobless claims data, while government debt prices touched session highs the data. The dollar extended losses against the yen, but rose against the euro.

EMPLOYMENT GROWTH SEEN SLOWING

The claims data fall outside the survey period for the governments closely watched employment report for April, which will be released on Friday. Nonfarm payrolls increased 186,000 last month, according to a Reuters survey, after rising by 216,000 in March — which was the most in 10 months.

The anticipated slowdown in hiring is mostly blamed on high food and gasoline prices, which clipped economic growth in the first quarter. Still, the unemployment rate is expected to have held at a two-year low of 8.8 percent.

Last week, even the four-week moving average of unemployment claims — a better measure of underlying trends — increased 22,250 to 431,250, the highest since November.

A Labor Department official attributed the surprise surge in claims last week to spring break layoffs in New York, which added 25,000, and the start of an emergency benefits program in Oregon, which brought in new claimants, including some already on the regular programs.

There were also additional claims from the auto sector, the official said, adding that there could have been some small number of claims related to the tornadoes that struck parts of the country.

The New York spring break fell outside the dates the department uses for seasonal adjustments to account for the holiday nationwide.

"The increases are beyond what seasonal factors expected and that is causing claims to go up," the official said.

But the productivity report offered some hope for the labor market recovery.

While the step back in productivity was flagged by a sharp pull back in economic growth in the first quarter, it also suggested that businesses have probably little room to continue with their cost cutting strategies and may soon need to step up hiring.

Productivity — which measures hourly output per worker — rose rapidly in the past two years, peaking at an 8.9 percent rate in the second quarter of 2009. Businesses are estimated to be sitting on $2 trillion in cash.

The economy grew at a 1.8 percent pace in the first three months of this year after expanding at a 3.1 percent rate in the fourth quarter.

The productivity report showed a rebound in unit labor costs, which rose at a 1 percent rate in the first quarter after declining 1 percent in the prior period. Despite the rise in labor costs in the first quarter, wage inflation remains tame amid an 8.8 percent unemployment rate.

High food and energy prices have stoked inflation fears, but Federal Reserve officials see limited scope for a broad pick up in price pressures.

Economists had expected unit labor costs to rise at a 0.8 percent rate in the first quarter. During the first quarter, output rose at a 3.1 percent rate, moderating from 4.4 percent pace in the final three months of 2010.

© 2017 Thomson/Reuters. All rights reserved.

 
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The number of Americans filing for jobless benefits rose to an eight-month high last week and productivity growth slowed in the first quarter, clouding the outlook for an economy that is struggling to gain speed. Initial claims for state unemployment benefits rose 43,000...
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2011-20-05
Thursday, 05 May 2011 10:20 AM
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