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The United States economy has slowed considerably this year from a year ago, according to a report from the Commerce Department released on Friday.

The country’s gross domestic product, a broad measure of the goods and services produced across the economy, grew at an annual rate of 1.3 percent in the second quarter, after having grown at an annual rate of 0.4 percent in the first quarter — a number that itself was revised sharply down from earlier estimates of 1.9 percent . Both figures were well below economists’ expectations.

Data revisions going back to 2003 also showed that the 2007-2009 recession was deeper, and the recovery to date weaker, than originally estimated. Indeed, the latest figures show that the nation’s economy is still smaller than it was in 2007, when the Great Recession officially began.

“The word for this report is ‘shocking,’ ” said John Ryding, chief economist at RDQ Economics. “With slow growth, higher inflation and almost no consumer spending growth, it is very tough to find good news.”

The latest figures come as Congress is debating how to put the nation on a more sustainable fiscal path, with measures that some economists worry could further slow the economy and even throw it back into recession. Even in the absence of further austerity measures, some of the government’s current stimulative policies, such as the payroll tax cut, are phasing out, and state and local governments are slashing spending dramatically.

Such fiscal retrenchment was already expected to be a drag on growth in the coming year; the Commerce Department’s report and the Washington debt talks only magnify those concerns.

“There’s nothing that you can look at here that is signaling some revival in growth in the second half of the year, and in fact we may see another catastrophically weak quarter next quarter if things go wrong next week,” said Nigel Gault, chief United States economist at IHS Global Insight. By “things going wrong,” he said he means “if Congress actually starts implementing a massive contraction by suddenly cutting government spending immediately,” as many Republican representatives hope to do.

Prolonging the continuing talks in Washington to raise the amount of money the United States can borrow could also damage prospects for growth in the third quarter, as businesses and families wait to make big purchases until the threat of federal default passes.

“Even if everything gets done, there is still a big hit coming from uncertainty,” said Paul Dales, a senior United States economist at Capital Economics. “Companies have probably put projects on hold and postponed hiring.”

Usually, a sharp recession is followed by a sharp recovery, meaning the recovery growth rate is far faster than the long-term average growth rate; last quarter, though, output grew at only about one-third of the average rate seen in the 60 years preceding the Great Recession. As a result, the country’s output is far below its potential.

Particularly distressing to economists is that consumer spending — which, alongside housing, usually leads the way in a recovery — has been extraordinarily weak in recent quarters. Inflation-adjusted consumer spending in the second quarter barely budged, increasing just 0.1 percent, the Commerce Department report showed.

“People are spending more, but that spending is being absorbed in higher prices, not in buying more stuff,” Mr. Ryding said.

Even the brightest parts of the report were seen as bittersweet. For example, motor vehicle output fell much less than was predicted after the natural disasters in Japan disrupted supply chains. But that means there will likely be a less dramatic bounce back in autos in the coming months, which economists were counting on to raise growth rates later this year.

The economy’s slow growth rate is largely responsible for stubbornly high joblessness across the country, economists say. As of June, 14 million Americans were actively looking for work, and the average duration of unemployment has been reaching record highs month after month. Businesses are sitting on a lot of cash, but are still reluctant to hire because there is so much uncertainty about the future of the economy and whether they will continue to have a steady flow of customers.

Slow economic growth takes not only a human toll, but a fiscal one as well. Tepid output increases mean slower growth in the tax revenue needed to pay down the nation’s debt.

Washington, therefore, has a delicate balancing act in its current debt ceiling debates. Given the unsustainable debt trajectory that the economy is on — primarily because of the country’s growing health care obligations — Congress needs to impose greater fiscal discipline. But imposing too much too soon, or being too focused on the wrong types of spending cuts, could be self-defeating by weakening growth so greatly that tax revenue falls and requires the country to borrow even more.  

Given inflation concerns, it also seemed unlikely that the Federal Reserve will swoop in with another round of monetary easing to goose growth.

“There’s not going to be additional monetary stimulus, and it’s hard to imagine any fiscal stimulus given the current discussion in Washington,” Mr. Ryding said. “So what’s going to get us out of this? The inevitable conclusion is time, and that’s not very satisfactory.”

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Source:  The New York Times

The latest economic numbers have not been good. Jobless claims rose last week, the Labor Department said on Thursday. Another report showed that economic growth at the start of the year was no faster than the Commerce Department initially reported — “a real surprise,” said Ian Shepherdson of High Frequency Economics.

Perhaps the most worrisome number was the one Macroeconomic Advisers released on Wednesday. That firm tries to estimate the growth rate of the current quarter in real time, and it now says annualized second-quarter growth is running at only 2.8 percent, up from 1.8 percent in the first quarter. Not so long ago, the firm’s economists thought second-quarter growth would be almost 4 percent.

An economy that is growing this slowly will not add jobs quickly. For the next couple of months, employment growth could slow from about 230,000 recently to something like 150,000 jobs a month, only slightly faster than normal population growth. That is certainly not fast enough to make a big dent in the still huge number of unemployed people.

Are any policy makers paying attention?

When the economy weakened in the first quarter, Ben S. Bernanke, the Federal Reserve chairman, and Obama administration officials said the slowdown was just a blip and growth would soon pick up. Today, many Wall Street economists are saying much the same thing: any day now, things will improve.

Maybe they will. But the history of financial crises shows that they produce weak, uneven recoveries, with unemployment remaining high for years. That history also shows that aggressive government action — the kind of action Washington took in 2008 and 2009, but not for most of 2010 — can make the situation much better than it otherwise would be.

The latest signs of weakness suggest that policy makers remain too sanguine. It is easy to see how the rest of 2011 could end up disappointing, much as 2010 did.

For one thing, there are specific forces holding back growth. Oil prices, though down in the last few weeks, are still 40 percent higher than a year ago and continue to siphon money away from the American economy to overseas economies. When I filled my gas tank last weekend, it cost $74, more than I think I have ever paid.

The housing market also remains in terrible shape. Europe is still struggling with its debt troubles. State and local governments continue to cut jobs.

These specific problems worsen the broader insecurity of both households and business executives — insecurity that is typical in the wake of a financial crisis. Long after the crisis itself is over, businesses are slow to hire and quick to fire. Thursday’s report on new jobless claims showed that they rose by 10,000, to 424,000, which is not a number associated with a solid recovery.

“Labor market gains may be faltering somewhat,” Joshua Shapiro, chief United States economist at MFR, a New York research firm, wrote to clients after the report’s release.

For households, already coping with miserly wage growth, that is another reason not to spend. The Commerce Department’s updated gross domestic product figures showed that consumer spending grew at an annual inflation-adjusted rate of only 2.2 percent in the first quarter, not the 2.7 percent rate the department initially reported.

The economy does still have some bright spots, and they could grow in coming months, just as policy makers and private forecasters are, once again, predicting. If North Africa and the Middle East do not become more chaotic, oil prices may continue falling. Vehicle production will probably pick up as the parts shortages caused by the Japanese earthquake end. The falling dollar will continue to help American exporters, as well as any domestic businesses that compete with foreign importers.

But there is no doubt that the economy has performed considerably worse in the last few months than most policy makers expected. The situation is now uncomfortably similar to last year’s, when the economy sped up in the first few months only to stall in the spring and summer.

The most sensible response for Washington would be to begin thinking more seriously about taking out an insurance policy on the recovery. The Fed could stop worrying so much about inflation, which remains historically low, and look at how else it might encourage spending. As Mr. Bernanke has said before, the Fed “retains considerable power” to lift growth.

The White House and Congress, meanwhile, could begin talking about extending last year’s temporary extension of business tax credits, household tax cuts and jobless benefits beyond Dec. 31. It would be easy enough to pair such an extension with longer-term deficit reduction.

Any temporary measures will eventually need to lapse, of course. But the current moment remains a textbook time to use them — when the economy is struggling to emerge from the aftermath of a terrible recession. The one thing not to do is to turn to deficit reduction too quickly after a crisis, as Europe is painfully learning.

Almost four years after the mortgage market first began to quiver and unemployment began to rise, Americans are understandably eager for good economic news. But wishing for it doesn’t make it so. You have to wonder whether the people in Washington have learned that lesson yet.
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Source: The New York Times

High gasoline prices, government budget cuts and weaker-than-expected consumer spending caused the economy to grow only weakly in the first three months of the year.

The Commerce Department estimated Thursday that the economy grew at an annual rate of 1.8 percent in the January-March quarter. That was the same as its first estimate a month ago.

Consumer spending grew at just half the rate of the previous quarter. And a surge in imports widened the U.S. trade deficit.

Most economists think the economy is growing only slightly better in the current April-June quarter. Consumers remain squeezed by gas prices, scant pay increases and a depressed housing market.

Analysts estimate that growth has accelerated slightly to around 2.5 percent in the current April-June quarter. For the entire year, they think the economy will grow around 3 percent. That would be little changed from the 2.9 percent growth in 2010.

Also Thursday, the government said more people applied for unemployment benefits last week. It was the first increase in three weeks and evidence that the job market remains sluggish.

The number of people seeking benefits rose by 10,000 to a seasonally adjusted 424,000. Applications are above the 375,000 level that’s consistent with sustainable job growth. Applications peaked at 659,000 during the recession. Employers stepped up hiring this spring, but some economists worry that rising applications indicate hiring is slowing.

Economists had been more optimistic when the year began. They assumed that a cut in workers’ Social Security taxes, which raised take-home pay, would boost consumer spending. And new business tax breaks were thought likely to spur business spending.

But political upheaval in the Middle East and North Africa sent energy prices soaring. The result was that consumers had to pay more for gas, leaving less money to spend on other items.

The government’s revised estimate for gross domestic product — the economy’s total output of goods and services — showed consumer spending growing at an annual rate of just 2.2 percent. That’s sharply down from an initial estimate of 2.7 percent.

Consumer spending, which accounts for 70 percent of economic activity, had grown at a much faster 4 percent rate in the October-December period.

The GDP revision showed that the government sector is dragging on growth. Government spending fell at an annual rate of 5.1 percent. Federal and state and local governments have cut spending to battle budget deficits.

Economists expect government spending to remain weak. They note that Congress will likely slash spending to try to shrink $1 trillion-plus budget deficits.

Exports grew faster than previously estimated last quarter — a brisk 9.2 percent rate. But imports grew even faster — at a 9.5 percent rate — causing the U.S. trade deficit to widen. A higher trade deficit subtracts from growth.

Spending by companies on equipment and software grew at a solid rate of 11.6 percent. Economists expect that to continue as companies take advantage of one-year tax write-offs for such purchases.

David Wyss, chief economist at Standard & Poor’s in New York, said he thinks the economy will grow at an annual rate of 2.5 percent in the current quarter. Wyss said he expects growth to strengthen slightly to around 3 percent in the second half of this year.

In part, that’s because the U.S. manufacturing supply disruptions caused by the Japanese earthquake and nuclear crisis in March should ease. And auto plants and other factories get back to full production.

Still, analysts think the economy may not be able to exceed 3 percent growth for the full year.
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Source: The Washington Post

Americans earned and spent more in March, but much of the extra money went toward more expensive gasoline.

Personal incomes rose 0.5 percent last month and consumer spending increased 0.6 percent, the Commerce Department reported Friday. But after adjusting for inflation, spending rose a much more subdued 0.2 percent and after-tax incomes were essentially flat.

Consumer spending had been expected to post solid gains this year, helped by stronger employment growth and a 2 percentage-point cut in Social Security payroll taxes. But Americans are paying more for gas, prompting economists to scale back their growth forecasts.

The national average at the pump on Friday was $3.90 a gallon— 31 cents higher than a month ago and more than $1 than what consumers paid a year ago.

Less growth in consumer spending was a big reason the overall economy slowed sharply in the first three months of the year. The 1.8 percent growth rate was weaker than the 3.1 percent growth in the previous quarter. Consumer spending is important because it accounts for roughly 70 percent of economic activity.

“The increase in prices is absorbing pretty much all of the windfall from the payroll tax cut,” said Paul Dales, an economist with Capital Economics. “If gasoline prices were to stop rising, real consumption could bounce back in the second quarter. But even then, jobs growth and wage growth are not strong enough to result in a significant and sustained acceleration in consumption growth. This economic recovery is going to continue to disappoint both this year and next.”

The rise in spending was heavily concentrated in nondurable goods, which includes gasoline. Spending in this category jumped 0.9 percent while spending on longer-lasting manufactured goods, such as autos, was essentially flat. Spending on services rose 0.5 percent.

The savings rate remained unchanged at 5.5 percent of after-tax incomes in March. Americans saved just 2.1 percent in 2007 before the recession. The bursting of the housing bubble has made them more cautious with their finances.

A key inflation gauge that is closely watched by the Federal Reserve showed prices rising 0.4 percent in March, the same as February. Excluding food and energy, prices were up a more subdued 0.1 percent in March and are 1.8 percent higher than a year ago, well within the Fed’s comfort zone.
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Source: The Chicago Sun-Times

The United States economy grew at an annual rate of 2 percent in the third quarter, the Commerce Department reported Friday, as it struggles to gain any momentum for a sustained recovery.

That estimate matched the consensus forecasts for the gross domestic product, and is a slight uptick from the second quarter.

An economy growing at a sluggish, 2 percent, nearly all economists agree, cannot produce nearly the demand needed to bring down the nation’s painfully high 9.6 percent unemployment rate. And the trade gap remains wide, as imports outpaced exports.

These numbers are unlikely to provide much of a morale boost for President Obama and Democrats, who are just days away from crucial midterm elections. High unemployment and soaring foreclosure numbers in the Midwest and Western states already made this a particularly tough election season for Democrats. Friday’s numbers will probably produce little relief.

“It’s the expected G.D.P. number, which is mostly bad news for the economy,” said Josh Bivens, an economist with the liberal leaning Economic Policy Institute. “The growth rate is just nowhere near enough to put downward pressure on unemployment.”

Demand, seen as crucial to re-igniting the American economy, appeared flaccid in the third quarter, although there were, here and there, hints of increased consumer spending. Income growth adjusted for inflation and taxes slowed noticeably, rising 0.5 percent in the July-September period after increasing 4.4 percent in the second quarter. And at the other end, prices excluding food and energy increased 0.6 percent, compared with 0.8 percent in the second quarter.

In recent weeks, the economy has presented two faces, which is reflected in the latest G.D.P. numbers. There have been fledgling signs of growth: home sales and chain store sales are up bit, a swelling stock market has raised consumer confidence a few notches, and jobless claims fell noticeably last week, albeit to a still high and painful level.

At the same time, the steroidal effect of the stimulus spending is fading. City and state governments have shed tens of thousands of employees, and states face a sea of red ink as they look at next year’s budgets.

“Two percent growth is not great but it beats zero,” said Steve Blitz, chief economist with ITG investment research. “The consumer is still underemployed and over indebted, so the normal push won’t be there. But you’re at least seeing enough spending and growth by the consumer to keep the economy going at 2 percent or more.”

Friday’s number is a Commerce Department estimate based on a reading of many sectors of the economy, and that the final number may be revised substantially higher or lower. In the second quarter, the surprise was to the downside: the initial G.D.P. report had placed the growth rate at 2.4 percent, and it subsequently wheeled down to an annual rate of 1.7 percent.

The midterm elections on Tuesday further complicate the picture. As certainty edges aside uncertainty after votes are counted, American business might start spending a bit more, and banks might start lending. But few are willing to turn that wish into a forecast.

Consumer spending, which accounts for 70 percent of the economic growth in the United States, remains the great unknown. Americans have shed some debt, which is good, but largely in an unsightly fashion, which is not so good. They have defaulted in record numbers on credit card debt and lost their homes to foreclosure. The Federal Reserve Bank of San Francisco issued a notably gloomy forecast recently. “The economic recovery is proceeding at a very slow pace and has lost momentum since the spring,” the bank noted. “No sector of the private economy stands ready to drive a robust recovery.”

And David Rosenberg, economist for the Canadian investment firm Gluskin Sheff and Associates, does not put a lot of faith in consumers pulling the economy out of its ditch. “Make no mistake,” he said, “the primary trend remains on a downward slope as it pertains to discretionary spending.”

Personal savings was estimated at 5.5 percent, compared with 5.9 percent in the second quarter.

The European economies have shown signs of stabilizing of late, with Germany as a potential driver of growth (its unemployment recently reached an 18-year low). And this could bode well for America’s export sector. But imports in the third quarter once again grew faster than exports Imports grew at an annual rate of 17.4 percent, compared with an 5 percent for exports.

Government spending has slowed as the effects of the stimulus spending begin to wear off. That was reflected in the unemployment numbers for September. Companies added just 64,000 jobs last month, but over all, the economy lost 95,000 nonfarm jobs in September, the result of a 159,000 decline in government jobs. Local governments were particularly hard hit.

“The problematic factor is that consumers remain fundamentally insolvent or worried about becoming so, and too many of the major banks are zombies uninterested in commercial or industrial lending,” said James K. Galbraith, an economics professor at the University of Texas.

Still, each quarter that the economy does not lapse back into recession adds incrementally to consumer and business confidence, and perhaps eventually to growth. The great immediate test, economists say, is the fourth quarter of 2010. The hope, no more than that at this point, is that small signs of market strength might coalesce into something that looks like actual recovery.

“As with money, there is a power of compounding the economy,” Mr. Blitz said. “The longer you go with 2 percent growth, you begin to push up against constraints, and the more the fear of unemployment ebbs, the more chance there is that people will begin to feel confident. It’s a very slow burn.”
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Source: The New York Times

Housing starts in the United States increased more than expected in August to their highest level in four months and permits for residential construction also rose, government data showed on Tuesday, suggesting that the embattled market was starting to stabilize following the end of a tax credit.

The Commerce Department said housing starts rose 10.5 percent, the largest increase since November, to a seasonally adjusted annual rate of 598,000 units. July’s residential construction was revised down to show a 0.4 percent gain, which was previously reported as a 1.7 percent increase.

Analysts polled by Reuters had expected housing starts to rise to a 550,000-unit rate. Compared with August a year ago, housing starts were up 2.2 percent.

New building permits rebounded 1.8 percent to a 569,000-unit pace last month after a 4.1 percent drop in July, lifted by a 9.8 percent rise in permits for multifamily units. Analysts had expected a 560,000-unit pace in August.

The housing market has hit a soft patch after the end of a homebuyer tax credit in April. A combination of high unemployment and an oversupply of homes is also weighing on the sector, which was the main catalyst of the worst recession since the Great Depression.

The downturn ended in June last year, but the economic recovery has since lost momentum, sparking fears in financial markets of a renewed recession.

Residential construction in August was lifted by a 32.2 percent jump in groundbreaking activity in the volatile multifamily segment to an annual rate of 160,000 units.

Single-family starts increased 4.3 percent to a 438,000-unit pace, the highest since June.

Home completions increased 5.6 percent to a 603,000-unit pace, also the highest since June. The inventory of total houses under construction was unchanged at 444,000 units last month, while the total number of units authorized but not yet started fell 3.1 percent to a record low 87,000 units
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Source: The New York Times

There is no more disputing it: the economic recovery in the United States has indeed slowed.

The nation’s economy has been growing for a year, with few new jobs to show for it. Now, with growth at an annual rate of 2.4 percent in the second quarter, and federal stimulus measures fading, the jobs outlook appears even more discouraging.

“Given how weak the labor market is, how long we’ve been without real growth, the rest of this year is probably still going to feel like a recession,” said Prajakta Bhide, a research analyst for the United States economy at Roubini Global Economics. “It’s still positive growth — rather than contraction — but it’s going to be very, very protracted.”

A Commerce Department report on Friday showed that the economy had grown at a faster pace earlier in the recovery, expanding at an annual rate of 5 percent at the end of 2009 and 3.7 percent in the first quarter of 2010. Consumer spending, however, was weaker than initially believed.

Many economists are forecasting a further slowdown in the second half of the year, perhaps around an annual rate of 1.5 percent. That is largely because businesses have refilled the stockroom shelves that they had whittled down during the financial crisis, meaning there will not be much need for additional inventory orders.

Fiscal stimulus policies are also expiring, which may further drag on growth. And individual stimulus programs like expanded unemployment benefits have faced huge political battles each time they have come up for extension in Congress.

The approaching mid-term elections may further entrench the political stalemate after Congress returns from its August recess. As a result, pressure will probably increase on the Federal Reserve to use its tools to prevent a double-dip. Recent reports from Fed officials suggest the central bank has become increasingly worried about where the economy is headed.

American businesses, if not American households, seem to be hanging on.

The key driver of growth in the second quarter was nonresidential fixed investment, which covers items like office buildings and purchases of equipment and software. This sector rocketed up at an annual rate of 17 percent in the second quarter, compared with a 7.8 percent increase in the first. The equipment and software category alone grew at an annual rate of 21.9 percent, the fastest pace in 12 years.

“We’re seeing a sort of handover from consumer spending to capital spending,” John Ryding, chief economist at RDQ Economics, said “The consumer also looks to have saved more than we thought before, which means they’re perhaps further on the road to financial adjustment than we thought they were previously.”

Growth in consumer spending, which is usually a leading indicator of a recovery and which accounts for most economic activity in the United States, has been leveling off. It grew at an annual rate of 1.6 percent in the second quarter after an annual increase of 1.9 percent in the previous quarter.

The personal savings rate in the second quarter was estimated to have been 6.2 percent of disposable income, significantly higher than the 4 percent that had been estimated.

A separate report released Friday by the University of Michigan and Reuters showed that consumer sentiment tumbled in July.

The fact that businesses seem to be investing more in equipment than in hiring may be a reason why households have been reluctant, or perhaps unable, to pick up the pace of their spending.

“There are limits on the degree to which you can substitute capital for labor,” Mr. Ryding said. “But you can understand that businesses don’t have to pay health care on equipment and software, and these get better tax treatment than you get for hiring people. If you can get away with upgrading capital spending and deferring hiring for a while, that makes economic sense, especially in this uncertain policy environment.”

Data revisions of covering the last three years were also released on Friday. These showed that overall 2009 and 2008 were slightly worse than previously reported, but that the first quarter of 2010 was better.

As the global economy recovers, America’s trade activity has picked up. But imports once again grew faster than exports last quarter, presenting a drag on growth. Imports spiked at an annual rate of 28.8 percent, the biggest jump in a quarter-century, compared with an annual increase of 10.3 percent in exports.

Government spending shot up more than many anticipated, growing at an annual rate of 4.4 percent after a decline of 1.6 percent in the first quarter. Public spending was broad-based, with even state and local spending increasing for the first time in a year. This may be in part because of federal stimulus monies transferred to the states.

“You could see this in the monthly number for state and local construction spending,” said Nigel Gault, chief United States economist at IHS Global Insight. “Construction slows down during winter months, so stimulus may not have been doing as much earlier this year.”

Other policy initiatives, like the expiring homebuyer’s tax credit, also appear to have lifted demand. Residential fixed investment spending on items like new homes grew at an annual pace of 27.9 percent in the second quarter, after falling 12.3 percent the previous period.

“This will almost certainly reverse hard next quarter,” Jay Feldman, director of economics at Credit Suisse Securities, wrote in a note to clients.
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Source: The New York Times

Consumer prices fell for the second consecutive month in May, extending a break for Americans’ pocketbooks. Less expensive energy was the main factor pulling down prices.

But a weekly unemployment report found that the number of people filing new claims for jobless benefits jumped last week after three weeks of declines, a sign that hiring remains weak.

The Labor Department said the Consumer Price Index, the government’s most closely watched inflation barometer, dropped 0.2 percent in May, after a 0.1 percent dip in April.

It marked the biggest decline since consumer prices plunged 0.7 percent in December 2008. That was a period when the worst recession since the 1930s stoked fears of deflation. The country did not get stuck in a deflationary spiral then, and probably will not now, economists say.

Meanwhile, “core” consumer prices, which strip out volatile energy and food, edged up 0.1 percent in May, after being flat in April. That meant core prices are up only 0.9 percent over the past year — below the Fed’s inflation target.

For the year, overall consumer prices rose 2 percent — within the Fed’s inflation comfort zone.

Falling energy prices pulled overall prices down last month.

Energy prices dropped 2.9 percent, the most in more than a year. Gasoline prices posted the biggest decline — down 5.2 percent in May, the sharpest decline since December 2008.

Prices at the pump have dropped about 8 percent since hitting $2.93 a gallon on May 6. Global oil prices have been falling amid fears that the European debt crisis will hurt growth on the continent and possibly slow the global recovery.

Food prices were flat in May, down from a 0.2 percent rise in April. Falling prices for fruits and vegetables swamped rising prices for meat, cereals and dairy products.

Even though inflation is tame, workers’ paychecks are not benefiting. Average hourly earnings adjusted for inflation were flat for the 12 months ended May. That followed a 0.5 percent drop in April.

In the report on jobless filings, the Labor Department said initial claims for jobless benefits rose by 12,000 to a seasonally adjusted 472,000, the highest level in a month. Economists had expected claims would fall to a seasonally adjusted 450,000, according to Thomson Reuters.

First-time jobless claims have hovered near 450,000 since the beginning of the year after falling steadily in the second half of 2009. That has raised concerns that hiring is lackluster and could slow the recovery.

Still, the four-week average for unemployment claims, which smoothes volatility, dipped slightly to 463,500. That was down by 3,750 from the start of January.

The number of people continuing to claim benefits rose by 88,000 to 4.57 million. That does not include about 5.2 million people who receive extended benefits paid for by the federal government.

Congress has added 73 weeks of extra benefits on top of the 26 weeks typically provided by states. All told, about 9.7 million people received unemployment insurance in the week ending May 29, the most recent data available.

The extended benefit program expired this month. Congress is debating whether to continue it through the end of November.

Adding to worries about the job market, the Labor Department said earlier this month that the economy generated only 41,000 private-sector jobs in May. That was down from 218,000 in April.

In a third report, the Commerce Department said that the deficit in the broadest measure of trade rose in the first quarter to the highest point in more than a year as rising global oil prices and a rebounding economy pushed up imports sharply.

The deficit in the current account increased to $109 billion in the period, compared to a revised $100.9 billion in the fourth quarter of last year.

The current-account deficit narrowed to $378.4 billion in 2009, down a sharp 43.4 percent from the 2008 deficit of $668.9 billion. The big drop reflected a deep recession in the United States, which cut demand for imported goods. But with the United States economy recovering, analysts believe the trade deficit will increase this year.

The 8 percent increase in the first quarter deficit marked the third straight quarterly increase in the deficit, which now stands at the highest point since the final three months of 2008.
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Source: The New York Times