WRAPUP 4-U.S. jobs data strikes optimistic note for economy

Thu Aug 11, 2011 4:42pm EDT

Related Topics

* Initial claims fall to 4-month low last week

* Four-week moving average falls by 3,250

* Trade gap largest since October 2008

* Second-quarter growth seen revised down to 0.9 pct (Adds Obama, new analyst quote, updates markets to close)

By Lucia Mutikani

WASHINGTON, Aug 11 (Reuters) - The number of Americans claiming new jobless benefits fell to a four-month low last week, a sliver of hope for an economy battered for days by a credit rating downgrade and falling share prices.

The jobless claims data released by the Labor Department on Thursday eased concerns that the economy was heading back into recession, as feared by investors, and sparked a rally on Wall Street that lifted stocks 4 to 4.7 percent.

Initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 395,000, the Labor Department said, the lowest level since early April. Economists had expected a reading of 400,000.

"We are not necessarily on the verge of another dip in economic activity," said Millan Mulraine, a senior macro strategist at TD Securities in New York.

"The level of claims at this point is more consistent with at least no deterioration in labor market conditions and at best an economy that is adding jobs at about 200,000 (a month)."

However, the optimism generated by the claims report was dampened somewhat by a jump in the trade deficit to $53.1 billion in June, the largest since October 2008, from $50.8 billion in May.

As a result of the wider trade shortfall, economists estimated the second-quarter's already weak annual growth pace of 1.3 percent could be revised to 0.9 percent.

The government will release its second estimate for second-quarter gross domestic product on Aug. 26. The economy grew at a 0.4 percent rate in the first quarter.

The Federal Reserve said on Tuesday that economic growth was considerably weaker than expected and unemployment would fall only gradually. The U.S. central bank promised to keep interest rates near zero until at least mid-2013.

Hiring accelerated in July after abruptly slowing in the previous two months. However, there are worries that a sharp sell-off in stocks and the nasty fight between Democrats and Republicans over raising the government's debt ceiling could dampen employers' enthusiasm to hire new workers.

"It is possible that the risk aversion manifested in financial markets will spill over to hiring. However, the data in hand don't yet reflect such a dynamic," said Julia Coronado, chief North America economist at BNP Paribas in New York.


INSTANT VIEW-US jobless claims fall [ID:nN1E77A086]

Graphic - Jobless claims: r.reuters.com/zup23s

Graphic - U.S. trade balance: r.reuters.com/fyp23s ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>


President Barack Obama on Thursday renewed a call for an extension of a payroll tax cut and pressed Congress to pass legislation that would increase investment in the nation's aging infrastructure and boost exports.

"Over the coming weeks I am going to be putting out more proposals, week by week that will help businesses hire and put people back to work," Obama told workers at a battery plant in Michigan. "I am going to keep at it until every single American who wants a job can find one."

About 13.9 million Americans are unemployed.

Stocks have dropped sharply in recent weeks on fears of a new recession, exacerbated by Standard & Poor's decision to strip the United States' top notch AAA crediting rating last Friday.

A sovereign debt crisis in Europe has also not helped.

But U.S. stocks rallied on Thursday, boosted by the jobless claims report and solid earnings from Cisco Systems (CSCO.O). Sentiment was also fueled by department store chain Kohl's Corp (KSS.N) raising its full-year profit forecast.

Prices for Treasury debt fell and the market suffered its worst long bond auction in 2-1/2 years. The dollar was flat against a basket of currencies.

Economists remain cautiously optimistic that the world's largest economy will avoid a double-dip recession, citing declining energy prices and the unwinding of supply chain disruptions from the earthquake in Japan.

An increase in the volume of oil imports pushed the monthly oil import bill in June to its highest since August 2008. That and the second straight month of declines in exports contributed to the month's wider trade deficit.

Imports from China rose nearly 5 percent to $34.4 billion, lifting the closely watched trade gap with that country to $26.7 billion, the highest in 10 months.

U.S. exports fell for a second consecutive month, to $170.9 billion, as shipments to Canada, Mexico, Brazil, Central America, France, China and Japan all declined.

"The sharp drop in exports is a major concern for the economic outlook as it is an indication that the pace of global activity may be slowing appreciably," said TD Securities' Mulraine.

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Comments (2)
AlisonAnne wrote:
Where are all the insane comments from people who say things like “Obummer” and “Libtards”? Your grammar is always a treat. Hurry up and comment!

Aug 11, 2011 12:35pm EDT  --  Report as abuse
Successful political movements often outlive their purpose. What remains is a large, wealthy and powerful organization without any true purpose. The folks who derive wealth and status from this organization refuse to let it die. They search for new purpose often veering into the abyss of political absurdity.
Such was the fate of many liberal organizations in the 1970s causing the fracture of the Democrats.
Americans eventually figured that out. Finally.
Enter Ronald Reagan, the voice of reason. He led us back from the political cliff with a needed dose of conservatism, which was at the time, common sense.
Today the conservative right has begun to suffer this same fate. The Tea Party is only the beginning of the fracture of the GOP. Do we really need to cut the rich man’s taxes (again) to create the jobs we need? Will laying off millions of federal workers fix the unemployment problems we face? Does Wall Street really need deregulation? It’s called political absurdity and it’s abundant.
The political right isn’t about Conservatism anymore. The mantra of the right has become “Individualism.” (see “Ayn Rand”) Individualism basically says that rich people are the only ones who deserve any wealth at all. Everyone else is a leech deserving nothing. Rich people deserve all the wealth, all the power, everything.
Listen to an alcoholic insist that his drinking problem only hurts himself. See the pain in the faces of his loved ones. Nobody believes his words but him. That’s what he tells himself so he can keep getting drunk and still sleep at night. Individualism is the sleeping pill the ultra-wealthy are taking to rid off any conscience they may otherwise feel while they pocket pretty much everything. Listen to the GOP. You’ll hear plenty of it.
Americans are eventually starting to realize this. Finally!
I remember a comic saying (paraphrased): “young men thinking about getting married, save yourself some agony. Just find a woman you absolutely hate, give her everything you own and move to another state and start all over again, cause that’s how it plays out in the end. Every time.”
To those of you who actually believe in Individualism: save us all some agony. Find a billionaire you absolutely hate and give them everything you own. Then move to another 3rd world country and start all over again, because that’s how it plays out in the end.
Every time.
The upcoming elections are not so much about WHO we need as it is about WHAT we need: common sense!

Aug 11, 2011 1:07pm EDT  --  Report as abuse
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