REFILE-WRAPUP 4-High US jobless claims add to slowdown concerns

Thu Jun 2, 2011 4:48pm EDT

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 (Fixes missing letter in "Economists")
 * Jobless claims fall only 6,000, point to soft job market
 * First-quarter rise in unit labor costs lowered
 * Factory orders fall 1.2 percent in April
 (Adds small business survey on hiring in 6th and 7th
paragraphs from end, update markets)
 By Lucia Mutikani
 WASHINGTON, June 2 (Reuters) - The number of Americans
signing up for jobless benefits fell only slightly last week,
doing little to calm growing fears of a pullback in the U.S.
economy's recovery.
 Initial claims for state jobless benefits slipped 6,000 to
422,000, the Labor Department said on Thursday, which was
higher than the 415,000 claims expected by economists.
 The disappointing drop fits in with other data on consumer
spending and manufacturing indicating the economy has taken a
decisively weak tone as the Federal Reserve prepares to wrap up
its $600 billion government bond-buying program.
 While independent economists and officials at the U.S.
central bank continue to view the soft patch as transitory,
concerns of a deeper, protracted slowdown have grown.
 "The question is whether the slowdown is temporary or
something that is much longer," said Prajakta Bhide a research
analyst at Roubini Global Economics in New York. "It's hard to
say. A lot depends on what happens to consumption in the third
quarter."
 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
 INSTANT VIEW-US jobless claims [ID:nN02205938]
 Graphic - jobless claims r.reuters.com/zah89r
 Graphic - continuing claims r.reuters.com/ceh89r
 Graphic - May same-store sales r.reuters.com/fuh89r
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 Initial claims have now been perched above the 400,000 mark
for eight weeks in a row. Analysts normally associate that
level with a stable labor market.
 The report falls outside the survey period for the
government's closely watched non-farm payrolls data for May to
be released on Friday. Employers likely added 150,000 jobs,
according to a Reuters survey, after increasing payrolls by
244,000 in April.
 Much of the slowdown in growth has been blamed on high
commodity prices, bad weather and supply chain disruptions from
the March earthquake in Japan, which are all seen as
transitory.
 High food and gasoline prices cut into sales at major U.S.
chain stores in May, with retailers such as Target Corp
(TGT.N), Gap Inc (GPS.N) and J.C. Penney Co Inc (JCP.N)
reporting sales below analysts' expectations.
 Overall, sales at stores open at least a year rose 4.9
percent in May at the retailers tracked by Thomson Reuters
data, below the 5.4 percent increase that Wall Street expected.
[ID:nN02231116]
 Stocks on Wall Street fell, reflecting worries on the
economy. At the same time, prices for U.S government bonds,
which rose sharply on Wednesday as economic concerns grew, gave
back some of their gains with the yield on the benchmark
10-year note rising back above 3 percent.
 The struggling economy is proving to be President Barack
Obama's weak spot ahead of a re-election effort next year.
 Republican Mitt Romney on Thursday kicked off his second
White House bid with a hard-hitting economic message charging
that "Barack Obama has failed America." [ID:nN02249837]
 LABOR COSTS MUTED
 Economists on Wednesday had scrambled to cut their
forecasts for Friday's payrolls report after ADP, a payroll
service company, reported private employers added only 38,000
jobs last month, the smallest number since September.
 In another troubling sign, a survey of 733 small businesses
released on Thursday showed their hiring stalled in May. The
National Federation of Independent Business said its survey
found that the average number of net new jobs slipped to 0.01
per firm from 0.04 in April. [ID:nN9E7G402F]
 But the situation may improve. The Labor Department
confirmed on Thursday that business productivity braked sharply
in the first quarter, suggesting employers have no choice but
to hire to keep pace with demand.
 Productivity grew at a 1.8 percent annual rate in the first
quarter, the department said. While that was up from the
previously reported 1.6 percent pace, it was well below the 2.9
percent pace set in the fourth quarter.
 "We expect that over the next year the growth in
productivity will slow even more, as businesses have reached
the limits of how much more they can squeeze out of their
existing work force," said Nariman Behravesh, chief economist
at IHS Global Insight in Lexington, Massachusetts.
 "This is good news for employment growth, which is likely
to continue over the course of the next few quarters, albeit at
a moderate pace."
 The report also showed wage growth remained muted, with
unit labor costs -- a measure of how much it costs for the
labor needed for any given amount of output -- rising at a
downwardly revised 0.7 percent rate.
 The economy's slowing pace was underscored by a third
government report showing orders received by U.S. factories
fell 1.2 percent in April. [ID:nN02253767]
 (Additional reporting by Glenn Somerville; Editing by Kenneth
Barry)







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