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September 4, 2003 Yahoo News By By Anna Willard WASHINGTON (Reuters) - Americans are finding it unexpectedly tough to hold onto their jobs but other areas of the economy are showing signs of a pickup, two government reports out on Thursday showed. The number of U.S. workers lining up to claim first-time unemployment benefits showed a surprise increase last week, the Labor Department (news - web sites) said, adding to a dismal labor market picture. A separate report on trade from the Commerce Department (news - web sites) showed signs of a slight pickup in economic activity, which economists said bodes well for growth in the third quarter. But this was not enough to shake claims the economy is stuck in a jobless recovery, a worry for President Bush (news - web sites) as the 2004 presidential election approaches. "It's surprisingly bad news," said John Lonski, chief economist at Moody's Investors Service. "This tells us that the very good news we had on consumer spending for the months of July and August will not last unless employment growth returns," he added. The grim news on employment supports comments from Federal Reserve (news - web sites) officials that interest rates will stay low for a while even as growth picks up. It also gives ammunition to Bush's opponents who say his economic policies have done little to help Americans find jobs. "The disappointing pickup in the pace of layoffs reinforces the likelihood that the ... (Fed) will continue to emphasize the large amount of slack in the economy and downside risks with respect to inflation," said Jade Zelnik, an economist at Greenwich Capital. The Fed next meets to discuss interest rates on Sept. 16. Analysts are expecting rates to be left on hold at 45-year lows of 1 percent at that meeting and into next year. The Labor Department said first-time filings for state jobless benefits rose by 3,000 to 422,000 in the week ended Sept. 6. The climb, which pushed claims to their highest level since early July, defied predictions on Wall Street for a drop to 400,000 from the 413,000 originally reported for the Aug. 30 week. The 400,000 level is seen by economists as a dividing line between a deteriorating and improving labor market. The dollar weakened against other currencies after the report was released but stocks shrugged off the numbers. U.S. Treasury bond prices rallied after the report was released but then fell back.
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Though last week was shortened by Labor Day, a department spokesman said the holiday appeared to have had little impact on the claims figures, which are adjusted for seasonal factors. A report last week showing employers slashed 93,000 workers from their payrolls in August surprised economists, who thought an unusually long period of labor market weakness was finally drawing to a close. August's hemorrhaging brought the job-loss toll since the economy fell into recession in early 2001 to 2.8 million, including 1.1 million since the recession ended 21 months ago. TRADE GAP GROWS MODESTLY Commerce said the trade gap widened modestly in July as Americans bought the second-highest level of imported goods on record, but in a good sign for economic growth, exports also rose. The trade gap grew to $40.3 billion in July from a revised $40.0 billion in June, the Commerce Department said. The number was broadly in line with analyst expectations for the deficit to grow to $40.6 billion. Boosted by demand for industrial supplies and consumer goods, imports rose by $2.0 billion in July to $126.5 billion, the highest level since a record hit in September 2000. The gain dovetailed with analysts' expectations that a pickup in consumer spending and lean inventories at retailers and wholesalers would lead to increased appetite for foreign goods. Reflecting overseas demand for capital goods, industrial supplies and autos and parts in an improving global economy, exports rose by $1.7 billion to $86.1 billion, the highest level since May 2001. The trade deficit with China jumped to a record $11.3 billion, with imports also rising to a record level. American manufacturers complain that China's exchange rate peg to the U.S. dollar is keeping the yuan artificially weak, undercutting U.S. exports and contributing to a widening trade gap and massive job losses at U.S. factories. Treasury Secretary John Snow visited China last week to ask officials there to loosen their exchange regime. China agreed it would eventually do so but balked at giving a timetable. |
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