April 20, 2024

Jobless Claims Ease Amid Weak Growth

The reports suggested growth was being hampered by a combination of bad weather at home and supply disruptions caused by the March earthquake in Japan, and analysts said the economy should regain momentum by the second half of the year.

“What you are looking at is second-quarter growth which may be a little softer than what people are expecting, but that’s going to be temporary,” said Rudy Narvas, an economist at Société Générale in New York.

First-time claims for state unemployment benefits fell 29,000 to 409,000 last week, the Labor Department said.

While the initial claims decline was more than economists’ expectations for a fall to 420,000, for a sixth straight week they remained above the 400,000 level that is normally associated with stable job growth.

The claims data covered the survey period for the government’s closely watched employment report for May, which will be released early next month. Claims rose by 5,000 in the April and May survey periods, indicating a loss of momentum in the pace of labor market improvement.

“Based on this and other incoming data, we look for a gain of 190,000 in May nonfarm payrolls and a 210,000 increase in private payrolls,” said Michael Gapen, a senior United States economist at Barclays Capital in New York.

The drop eased fears that a large increase the jobless rate last month reflected a fundamental deterioration in the jobs market, buttressing the view that the increase was because of auto plant shutdowns and other one-time factors.

In a separate report, the Philadelphia Federal Reserve Bank said its business activity index — a gauge of factory activity in the mid-Atlantic region — slumped to a seven-month low.

The flow of orders and shipments slowed significantly, while unfilled orders and inventories dropped. Employers, however, added workers.

Economists said this suggested that much of the slowdown in factory activity in the region last month reflected supply chain disruptions at motor vehicle assembly plants, which should prove to be temporary. A Fed report on Tuesday showed that motor vehicle output dropped 8.9 percent in April, causing manufacturing activity to contract for the first time in 10 months.

Estimates for second-quarter economic growth currently range from a 3 percent to 3.5 percent annual pace, but some analysts have started trimming forecasts as the impact of the supply chain disruptions becomes more evident.

The economy grew at a 1.8 percent rate in the first three months of this year, after growing at a 3.1 percent clip in the fourth quarter.

Although some of the factors hindering growth may prove temporary, housing will remain a headache.

Sales of previously owned homes fell 0.8 percent last month to an annual rate of 5.05 million units, the National Association of Realtors said. Housing is buckling under the weight of foreclosed properties, which are depressing prices.

“The economy is not going to grow at a 3 percent pace or more on a sustainable basis until we clear this backlog of foreclosed properties and housing begins to recover,” said Mark Vitner, a senior economist at Wells Fargo Securities.

The data suggested the Federal Reserve will be in no hurry to shift from its easy monetary policy stance.

Mortgage delinquencies 90 days past their due date in the first quarter were the lowest since the beginning of 2009, the Mortgage Bankers Association said.

Article source: http://feeds.nytimes.com/click.phdo?i=2e99a585a6399a266137e95d2999d206

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