Unemployment benefits, trade data point to improvement
Unemployment benefits claims dipped by 1,000, just below expectations for unemployment benefits claims. Trade balance report confirms US avoided third-quarter recession.
Marcus Castro/The Fayetteville Observer/AP
The number of Americans filing new claims for jobless benefits was steady last week and the trade deficit narrowed slightly in August, indicating a mild improvement in the economy.
Initial claims for state unemployment benefits dipped 1,000 to a seasonally adjusted 404,000, the Labor Department said on Thursday, just below economists' expectations for 405,000.
A separate report from the Commerce Department on the trade balance confirmed the economy avoided a recession in the third quarter, with the growth pace expected to have accelerated from the April-June period's anemic 1.3 percent rate.
``These reports add to the recent flow of encouraging economic releases, which have been pointing to an economy that has not only averted a second recession, but one that may be slowly regaining some positive momentum,'' said Millan Mulraine, senior macro strategist at TD Securities in New York.
Reports ranging from manufacturing to employment suggest the economy continues to plod along, but Europe's inability to get to grips with its debt crisis poses a threat and analysts warn it could drag the United States into a new recession.
A Reuters survey released on Thursday showed economists see a one-in-three chance of a new downturn.
Data last week showed nonfarm employment increased 103,000 in September after rising 57,000 the prior month.
While payrolls last month were lifted by the return of 45,000 Verizon Communications workers, key measures of labor market health showed some improvement.
The U.S. trade deficit edged down to $45.61 billion in August from $45.63 billion the prior month. Economists said trade could add as much 0.4 percentage point to third-quarter gross domestic product.
``It seems that the technical rebound of the U.S. economy that we have been expecting for months has materialized after all, despite the gloomy messages sent by survey-based confidence indicators,'' said Harm Bandholz chief U.S. economist at UniCredit in New York.
Estimates for third-quarter growth range between 1.5 percent and 2.5 percent. Weak growth has left the Federal Reserve searching for more ways to boost output, having already cut overnight lending rates to near zero and pumped more than $2 trillion into the economy.
Fed officials last month discussed steps they could take if the economy were to weaken further, including giving more information on their goal for unemployment.
However, analysts do not expect the Fed to take further action at its next meeting in November.
The trade report showed the trade gap with China widened to a record high $29.0 billion in August, which could hand the U.S. Congress ammunition as it considers legislation to penalize China for its trade and currency practices.
The U.S. Senate this week approved a controversial bill aimed at forcing China to raise the value of the yuan in an effort to save American jobs, sending it to the House of Representatives where its fate is uncertain.
``The widening in the bilateral trade deficit with China to a new record high is only going to make trade policies more appealing to policymakers,'' said Paul Dales, senior U.S. economist at Capital Economics in Toronto.
Boosting exports would help to address the stubbornly weak labor market, which has kept theunemployment rate at 9.1 percent for three straight months.
Economists are cautiously optimistic that job creation will gather momentum, pointing to the moderation in layoffs.
Initial jobless claims have circled around the 400,000 mark usually associated with some improvement in the jobs market for three weeks. In addition, the four-week moving average, considered a better measure of labor market trends, fell 7,000 to 408,000 last week.
``This is good news because the trend in jobless claims had risen steadily from mid-August to mid-September, which pointed to a potential pickup in layoffs,'' said John Ryding, chief economist at RDQ Economics in New York.
``However, initial claims need to fall decisively below 400,000 to suggest that payroll growth has picked up to a rate that could be described as solid.''
The number of people still receiving benefits under regular state programs after an initial week of aid dropped 55,000 to 3.67 million in the week ended Oct. 1.