Rise in jobless claims confounds the experts

Friday, July 11, 2003

Rise in jobless claims confounds the experts
Poor job market, sales growth called signs of struggling economy

By JEANNINE AVERSA
THE ASSOCIATED PRESS

WASHINGTON -- The number of Americans filing claims for jobless benefits climbed to a five-week high last week, a fresh sign that businesses are still of a mind to pare down rather than bulk up.

And big retailers reported only modest gains in June as wet weather and cool temperatures combined to dampen sales.

The latest batch of economic news yesterday depicted an economy struggling to get back to full economic speed.

"Basically we're stuck in the vicious cycle. Consumers, worried about their jobs, are restrained in their spending. Businesses, fearful of making bets with demand so low, are restrained in their hiring," said Oscar Gonzalez, economist at John Hancock Financial Services.

For the workweek ending July 5, new applications for unemployment benefits rose by a seasonally adjusted 5,000 to 439,000, the highest level since the week ending May 31, the Labor Department said. The increase surprised economists who were expecting claims to go down.

For 21 weeks in a row, claims have remained stubbornly above the 400,000 level associated with a sluggish job market.

The more stable four-week moving average of claims, which smooths out weekly fluctuations, edged up by 1,000 to 426,750 last week, representing the highest level since June 21.

The number of out-of-work Americans continuing to draw jobless benefits jumped by 87,000 to 3.8 million for the workweek ending June 28, the most recent period for which that information is available. That represented the highest level since Feb. 26, 1983, and suggested that not a lot of hiring is taking place.

On the retail front, Wal-Mart Stores Inc., the world's largest retailer, reported a small sales gain that was a bit below analysts' forecasts.

Department stores and clothiers continued to struggle.

Although consumers didn't shop until they dropped last month, they generally are spending sufficiently to keep the economy going. Because consumer spending plays a major role in shaping economic activity, analysts are still keeping a close eye on how consumers behave amid the stagnant job climate.

Last week the government reported that the nation's unemployment rate climbed to 6.4 percent in June, a nine-year high.

Businesses, wanting profits to improve and facing lackluster customer demand, have been reluctant to crank up capital spending and hiring, the main factors hampering the economy's full recovery.

Federal Reserve Chairman Alan Greenspan, meanwhile, said in a Capitol Hill appearance yesterday that high natural gas prices and shortages already are having an adverse impact on some industries but, as yet, not much direct effect on the overall economy.

Still, Greenspan predicted a loss of jobs in industries heavily dependent on natural gas as U.S. companies lose business to foreign competitors that pay less for energy.

Add P-I Business headlines to