Labor market shows signs of slow recovery
Wary firms still aren’t hiring
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.
“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 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 6.7 million jobs. That toll is expected to grow today, 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 because of the weakness in the unemployment claims figures.
Christina Romer, a top Obama economic adviser, has said 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.
Stocks gained after a four-day slide, but investors refrained from making big moves ahead of today’s report on unemployment. The Dow Jones industrial average added nearly 64 points, and broader indexes also rose.
In another report yesterday, a key gauge of activity in service industries, which account for about 80 percent of US economic activity, edged up to 48.4 in August from 46.4 in July. It was the best reading by the Institute for Supply Management’s service-sector survey in 11 months. And it pushed the index closer to topping 50, the dividing line between contraction and expansion.