Jobless claims show labor market may slow recoveryAssociated Press
WASHINGTON -- New claims for jobless aid fell less than expected last week, and the number of people continuing to receive unemployment benefits rose -- further signs that any economic recovery will be hindered by a weak job market and flat incomes.
Most economists think the recession is over, but they say the jobless rate will keep rising until at least next summer as the economy struggles to mount a sustained recovery. That means household incomes will remain depressed and consumer spending, which accounts for 70 percent of the economy, will continue to lag.
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"Firms are still not hiring, and that reflects deep pessimism about the sustainability of the economic recovery once government stimulus programs wear off," said Sal Guatieri, senior economist at BMO Capital Markets. "The lack of job creation remains a big headwind for cash-starved and credit-constrained consumers."
The nation's major retailers on Thursday reported lackluster results from August back-to-school sales. Results in established stores fell 2.1 percent in August compared with the same month last year, a compilation of 31 retailers' results by the International Council of Shopping Centers and Goldman Sachs indicated. Some major discounters managed to exceed expectations.
The Labor Department said the number of laid-off workers applying for benefits dipped to 570,000 from an upwardly revised 574,000 the previous week. That was a smaller improvement than economists had expected.
The number of Americans continuing to receive benefits jumped to 6.23 million, up 92,000 from the previous week and a troubling reminder of the difficulty people are having finding jobs. The continuing claims data lag new claims by one week.
The recession, which began in December 2007, has eliminated a net total of 6.7 million jobs. That toll is expected to grow on Friday, when the government reports the unemployment rate for August. Economists predict the jobless rate, now at 9.4 percent, will rise to 9.5 percent, with 225,000 net job losses in August.
Guatieri and other analysts said job losses for August might turn out even larger -- perhaps topping the 247,000 jobs lost in July -- because of the weakness in the unemployment claims figures.
"Employers are nervous that the economy is growing only because of policy stimulus and that when the stimulus fades, it will weaken again," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Christina Romer, a top Obama economic adviser, said last week that unemployment could reach 10 percent this year. And some private economists are forecasting it will hit 10.3 percent next summer before starting to improve. Guatieri expects it to remain near 10 percent for most of next year.