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The Daily Wildcat

The Daily Wildcat

 

Jobless claims rise

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Chart showing trend in weekly claims for unemployment insurance since December 2007. MCT 2011<p> 04000000; 09000000; FIN; krtbusiness business; krtlabor labor; krtnational national; LAB; krt; 2011; krt2011; mctgraphic; 04017000; krteconomy economy; krtnamer north america; krtusbusiness; u.s. us united states; 04018000; 09003002; 09009000; employment; job layoff; jobless rate; unemployment; USA; chart; carr; jobless claim claims initial continuing total; krt mct

WASHINGTON — Two new snapshots of the economy, one showing a sharp slowdown in first-quarter economic output and the other a surge in weekly unemployment claims, underscored the fragility of the recovery, its vulnerability to global shocks and the still-long road ahead for millions of American workers.

Many analysts tended to shrug off the report that gross domestic product grew by just 1.8 percent in the first part of the year — down from 3.1 percent in the fourth quarter of last year. Economists said the slowdown was due mostly to temporary factors such as the harsh winter weather and a surge in oil and food prices, which took a bite out of consumer spending and the nation’s trade.

Officials at the Federal Reserve as well as many private forecasters expect GDP to bounce back up to 3 percent or higher in the rest of the year.

But that depends partly on an easing of global economic and political problems, particularly the unrest in the Middle East that is behind the spike in petroleum prices. Such a reduction of tensions is far from certain. And new shocks are also possible, given the continuing upheavals in the region and elsewhere.

The latest GDP figures were close to analysts’ expectations, but the jobless claims report was an unwelcome surprise. With hiring picking up in the past two months, experts were looking for a dip in new filings for jobless benefits. Instead, the claims rose for the second time in three weeks, to the highest level since late January.

These figures are volatile from week to week, and some seasonal and temporary factors may have played a role in the latest jump, including the Easter holiday and the disaster in Japan, which disrupted delivery of parts in the auto and electronics industry.

Still, the report provided another discouraging sign for an economy that is struggling with 8.8 percent unemployment nearly two years after the official end of the recession last year.

Even before Thursday’s report, economists including Federal Reserve Chairman Ben S. Bernanke weren’t particularly encouraging that the jobless rate would come down quickly. In fact, Bernanke said Wednesday that high unemployment and the slow pace of the jobs recovery were key factors behind the Fed’s continued easy-credit policies.

“”On both economic growth and jobs, we’re seeing some retrenchment,”” said Sung Won Sohn, an economist at California State University. As for energy prices, he added, “”It could get worse in the second quarter.””

The damaging effects of higher oil and commodity prices were evident in the GDP report from the Commerce Department. Personal consumer spending, which had risen an impressive 4 percent in the fourth quarter, dipped back down to 2.7 percent in the first three months of this year.

“”We’re already beginning to see a slowdown in traffic counts in highways and freeways,”” said Sohn.

That includes people like Angela Waldron, a stay-at-home mom in central Michigan. She said she wasn’t making as many trips out to stores and other places because she’s cutting back on driving. What’s more, the former school teacher said, she’s paying more for fruits and fresh produce. “”Prices have gone up,”” she said.

Behind higher oil and food prices, inflation has picked up in recent months, cutting into consumers’ purchasing power. It’s also hurting businesses.

Champ Land, who owns Troutman Chair Co., a furniture manufacturing company in North Carolina, said it was costing him $600 more for each truck delivery of wood from West Virginia. He says he’s been able to pass on some of the cost to his customers, and his sales were up 15 percent in the first quarter compared to a year earlier. But he remains hesitant to add to his payroll.

“”That’s the last thing I want to do,”” Land said, adding that he’s concerned states will raise unemployment insurance taxes on firms to make up for the debts they owe for paying jobless claims. He says he’s considering buying equipment that might help him boost productivity.

The GDP report Thursday showed businesses continued to spend robustly for new equipment and software, jumping nearly 12 percent in the first quarter.

One cause for optimism in the coming quarters is U.S. exports. With the dollar having fallen in value, companies are expected to boost their shipments to overseas market.

“”It’s going to make domestically produced goods and services more attractive than imports,”” said Ben Herzon, a senior economist at Macroeconomic Advisers, a St. Louis forecasting firm.

Herzon also expects consumer spending overall to increase over the rest of this year in what he called “”a release of pent-up demand,”” behind stronger stock prices, a stabilizing housing market and improving lending conditions.

“”We’re in the heart of the recovery,”” he said. “”We still have a lot of unused resources. I think it’s reasonable to expect above-trend growth for the next couple of years.””

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