Jobless claims, exports fall in sluggish recovery
The reports echo Federal Reserve Chairman Ben Bernanke's suggestion this week that the rebound will remain intact despite high unemployment, a fragile housing market and Europe's debt crisis. But it will take time to create enough jobs to bring down the 9.7 percent unemployment rate.
Initial unemployment claims fell by 3,000 to a seasonally adjusted 456,000, the Labor Department said Thursday. That's the third straight drop. However, claims haven't moved below where they stood in January.
At the same time, the tally of laid-off workers continuing to claim jobless benefits fell to 4.5 million. That's the largest decline in almost a year. It could be because more people are finding work. But it may simply mean that they have exhausted their initial state benefits. A Labor Department analyst said state agencies didn't provide any explanation for the drop.
A weakening in U.S. sales overseas could hurt the job market. The Commerce Department said the U.S. trade deficit rose to the highest level in 16 months as exports fell for the second time in three months. Exports have been a source of strength for U.S. manufacturers.
A bright spot for the recovery are near-record low mortgage rates that fell again this week. Rates on 30-year fixed mortgages dropped to 4.72 percent — the lowest level of the year and barely shy of the record low of 4.71 percent.
Yet the housing market hasn't benefited the declining rates. Mortgage applications for home purchases fell to the lowest level in 13 years last week and was down 35 percent from a month ago, according to the Mortgage Bankers Association. That's a sign the market is struggling now that government tax credits have expired.
Still, stocks surged Thursday as investors appeared pleased with the U.S. economic reports and with news that Chinese exports rose in May. The Dow Jones industrial average shot up about 178 points in midday trading.
First-time 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 among economists that hiring remains weak and could slow the recovery.
Claims peaked at 651,000 in March 2009. Most economists will feel more optimistic that the economy is creating jobs once they fall below 425,000.
"In short, the downward trend in layoffs which began in the spring of last year is clearly over, at least for now," said Ian Shepherdson, chief U.S. economist for High Frequency Economics. "With claims stranded at this level, big private sector payroll gains are just not on the agenda."
Last week, the Labor Department said the economy generated only 41,000 private-sector jobs in May, down from 218,000 in April. Temporary census hiring added another 411,000 jobs.
Economists also closely watch the total number of people claiming benefits. They monitor those who are initially receiving 26 weeks of state benefits, on average. But they are also concerned about the number of people who have transitioned to extended federal unemployment benefits, which can last up to 73 additional weeks.
Nearly 5.4 million Americans are receiving extended benefits. All told, about 9.8 million people drew unemployment in the week ending May 22, the latest data available.
That total is likely to drop in the coming weeks. The extended benefit program expired in early June, and Congress is debating whether to continue it through the end of November.
About 325,000 people will lose unemployment aid by the end of this week due to the cutoff, the department estimates. That total could grow to 1.25 million by the end of the month if the extension isn't passed.
The economy is expanding, but at a weaker pace than in many previous recoveries. The Commerce Department said earlier this month that the nation's gross domestic product — the broadest measure of economic output — grew at a 3 percent annual rate in the January-to-March quarter. That was down from the 5.6 percent pace in the fourth quarter of 2009.
After the last deep recession in the early 1980s, the economy grew at a pace of 7 percent to 9 percent for five straight quarters.