New jobless claims drop; sales improve
But rebound still is apt to be slow
WASHINGTON - New applications for jobless benefits plunged to the lowest level in 14 weeks, a possible sign the massive wave of layoffs has peaked.
Still, the number of unemployed workers getting benefits climbed to a new record. And yesterday DuPont said it will cut another 2,000 jobs as falling orders from its automotive and manufacturing sectors eat away at sales.
Retail results improved, however, as Wal-Mart Stores Inc. and others reported April sales figures that beat expectations. Analysts acknowledged the positive signals, but cautioned that any recovery will be subdued as long as unemployment stays high.
The Labor Department reported yesterday that the number of newly laid off workers applying for benefits dropped to 601,000 last week - far better than the rise to 635,000 claims economists had expected.
But the total number of people receiving jobless benefits climbed to 6.35 million, a 14th straight record.
The four-week moving average of initial jobless claims, which smoothes out volatility, totaled 623,500 last week, a decrease of more than 30,000 from the high in early April. Goldman Sachs economists have said a decline of 30,000 to 40,000 in the four-week average is needed to signal a peak.
Meanwhile, retailers' business last month was helped by warmer weather, tax refunds, and a shift in the Easter holiday, helping Wal-Mart and many mall clothing chains post better-than-expected results.
But consumer sentiment and business in many areas remains weak, and analysts expect a drawn-out recovery.
In a separate report, the government said that productivity, the key ingredient to rising living standards, grew at a 0.8 percent annual rate in the January-March quarter, slightly better than the 0.6 percent increase economists had expected. Wage pressures, as measured by unit labor costs, increased at a 3.3 percent rate, down from a 5.7 percent spike in the fourth quarter.
While wage pressures outpacing productivity normally would raise alarm bells about inflation, the threat of any price spikes is seen as remote. Regulators and economists are not worried about inflation, since many workers are more concerned about keeping their jobs in the recession than demanding higher wages.
Even if layoffs have peaked, economists do not expect them to return to pre-recession levels anytime soon. They expect the jobless rate to keep rising through the rest of this year, even if their forecasts for an end to the recession in the second half of 2009 are accurate.
The government is scheduled to release unemployment data for April today. Analysts expect the US jobless rate to climb to 8.9 percent from the current 25-year high of 8.5 percent. Many analysts expect the jobless rate to hit 10 percent by the end of this year.