Rise in U.S. Jobless Claims, Drop in Confidence Point to Slowing Recovery
More Americans than forecast filed first-time jobless claims last week and consumer confidence fell, highlighting Federal Reserve Chairman Ben S. Bernanke’s concern that the slowdown in the economy may persist.
Applications for unemployment benefits increased 9,000 in the week ended June 18 to 429,000, Labor Department figures showed today. The level of claims exceeded the highest estimate in a Bloomberg News survey in which the median projection called for 415,000 filings. The Bloomberg Consumer Comfort Index dropped to minus 44.9 last week from minus 44.
Stocks fell and Treasury securities rose as the figures, combined with a drop in new-home sales, showed the recovery was struggling to gain momentum. Bernanke said yesterday that joblessness above 9 percent and weakness in housing show the economy’s “headwinds” may be stronger than Fed policy makers initially estimated.
“The jobless claims numbers are troubling,” said Maxwell Clarke, chief U.S. economist at IDEAglobal in New York. “The Fed is a little nervous,” he said, and the economy is “going to start next quarter out on a weak note.”
Purchases of new homes dropped 2.1 percent in May to a 319,000 annual rate, figures from the Commerce Department showed today in Washington. The median price of new properties sold declined from a year earlier.
‘Weak for a While’
“Things are still going to be weak for a while,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “We need to see much better job growth and more confidence in general,” he said, adding that new-home sales are “still sort of bouncing around the bottom.”
After dropping as much as 1.9 percent earlier in the day, the Standard & Poor’s 500 Index ended down 0.3 percent to 1,283.5 at the 4 p.m. close in New York on a report that Greece had reached an agreement with the European Union and International Monetary Fund regarding a five-year austerity plan. The yield on the benchmark 10-year Treasury note fell to 2.92 percent from 2.98 percent late yesterday.
The Bloomberg Consumer Comfort Index dropped as American grew more concerned about the economy. The decrease from the previous week, within the survey’s margin of error of 3 percentage points, left the gauge close to its average for the year. The report showed an index of consumers’ views of the economy fell to the worst reading since April.
The data buttress the results of a separate Bloomberg National Poll conducted June 17-20. It found that two years after the start of the recovery, 25 percent of those surveyed worried the economy was getting worse, while 23 percent said they were hopeful the recovery was improving. By a 44 percent to 34 percent margin, Americans said they believed they were worse off than when President Barack Obama took office in early 2009.
Estimates for first-time applications for jobless benefits ranged from 400,000 to 425,000 in the Bloomberg survey of 47 economists. The claims data coincide with the week the government surveys employers every month for the monthly jobs report. The Labor Department will issue the June employment count on July 8.
The four-week moving average, a less-volatile measure of initial claims, held at 426,250.
The number of people continuing to collect jobless benefits dropped by 1,000 in the week ended June 11 to 3.7 million. The figure does not include the number of workers receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments increased by about 68,000 to 3.95 million in the week ended June 4.
Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates.
After improving at the beginning of the year, labor market conditions have deteriorated. Payrolls grew by 54,000 workers last month, the smallest gain in eight months, after increasing by 232,000 in April, Labor Department data showed June 3. The jobless rate rose to 9.1 percent, the highest since December, from 9 percent.
Fed officials yesterday lowered their projections for employment, predicting the jobless rate will average 8.6 percent to 8.9 percent in the final three months of 2011, compared with 8.4 percent to 8.7 percent projected in April.
“We expect the unemployment rate to continue to decline but the pace of progress remains frustratingly slow,” Bernanke told reporters following the monetary policy meeting.
Gannett Co., publisher of 82 newspapers including USA Today, is cutting about 700 jobs at its community-newspaper unit.
Gannett is reducing staff because the economic recovery is not happening “as quickly or favorably as we had hoped,” Bob Dickey, president of Gannett’s U.S. community publishing division, said in a memo. The division includes the Cincinnati Enquirer and Indianapolis Star.
“While we are seeing improved circulation results and audience growth, weakness in the real estate sector, slow job creation and now softer auto ad demand continue to challenge revenue growth in the division,” Dickey said.
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