Jobs, trade data supports modest economic growth

WASHINGTON Thu Aug 9, 2012 4:52pm EDT

A man grabs his briefcase as he waits in line to speak with employers at the UJA-Federation Connect to Care job fair in New York, March 21, 2012. REUTERS/Shannon Stapleton

A man grabs his briefcase as he waits in line to speak with employers at the UJA-Federation Connect to Care job fair in New York, March 21, 2012.

Credit: Reuters/Shannon Stapleton

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WASHINGTON (Reuters) - The number of Americans filing new claims for jobless benefits unexpectedly fell last week, offering hope that some of last month's improvement in job growth could be sustained and give the U.S. economy a lift.

Other data on Thursday was also positive with the international trade deficit in June the smallest in 1-1/2 years as the petroleum import bill dropped sharply.

While the smaller trade gap implied upward revisions to the government's estimate of second-quarter gross domestic product published last month, the impact was blunted somewhat by an unexpected drop in wholesale stocks in June.

Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 361,000, the Labor Department said. Economists had expected claims to rise to 370,000 last week.

The data came after a Labor Department report last week showed that in July employers hired the most workers in five months.

"The fact that initial jobless claims have fallen back to their March lows suggests faster employment gains will continue to support consumer spending in the coming months," said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.

U.S. nonfarm payrolls increased 163,000 in July after three months of gains below 100,000. But the unemployment rate rose by a tenth of a percentage point to 8.3 percent.

Last week's jobless benefit claims report was the first in several weeks not affected by auto plant shutdowns, which caused wide swings in claims in July, making it difficult to get a clean reading on the jobs market.

A second report from the Commerce Department on Thursday showed the shortfall on the trade balance narrowed 10.7 percent to $42.9 billion, the smallest since December 2010, as low oil prices curbed imports.

That was below economists' expectations for a $47.5 billion deficit. The oil import bill fell $2.2 billion to 32.9 billion, the lowest since February. That was as the average price per barrel of crude oil dropped by the most since January 2009.

The reports helped the Standard & Poor's 500 stock index eke out a small gain and extend its rally for a fifth day on the New York stock market. Prices for U.S. government debt edged down, while the dollar rose broadly.

EXPORTS HIT RECORD HIGH

Immediately after the trade report, economists forecast the initial second-quarter U.S. GDP growth estimate would be revised to as high as 2.2 percent, but tempered those predictions after a later report showed a decline in wholesale inventories in June.

Second-quarter growth is now seen revised up to an annual pace of at least 1.8 percent from 1.5 percent. The government will publish its second GDP estimate later this month.

Total wholesale inventories slipped 0.2 percent, the largest fall since September, after being flat in May, as the value of petroleum stocks tumbled 8.7 percent - the largest drop since October 2008.

Inventory changes are a key component of GDP and contributed about a third of a percentage point to growth in the second quarter. Trade cut almost a third of a percentage point from GDP growth.

Exports in June increased 0.9 percent to a record $185.0 billion, with consumer goods such as pharmaceuticals posting strong gains. Motor vehicle exports increased 5.7 percent.

Overall imports of goods and services declined 1.5 percent to $227.9 billion. Outside petroleum, there were decreases in consumer goods imports, underscoring the weak domestic demand. The country imported less food and capital goods in June.

However, industrial supplies and motor vehicle imports rose.

"As long as we can keep selling more of our goods across the world, the economy can grow at a moderate pace," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

"Despite all the craziness in Europe and the slowdowns in Asia, our exports managed to increase. We shipped more of just about everything except food."

While exports showed strength in June, anecdotal evidence suggests a slowdown because of weak global demand. The Institute for Supply Management's export index declined in July for a third straight month.

There also are concerns that the worst U.S. drought since 1956, which has ravaged half of the country, could hit agricultural exports.

U.S. exports to the 27-nation European Union, in the grip of a continuing debt crisis that has slowed growth on the continent, increased 1.7 percent in June to $23.3 billion.

Exports to China, which is also growing more slowly than in recent years, fell 4.3 percent in June. Economists believed the drop in imports would be temporary, especially with the labor market improvement expected to lift consumer spending.

"A stronger labor market implies better consumer spending ahead, which will certainly lead to more robust trade figures," said Omair Sharif, an economist at RBS in Stamford, Connecticut.

"We will end up importing more and get the deficit widening. But that's not necessarily a bad thing."

(Lucia.Mutikani@thomsonreuters.com)

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Comments (12)
KarlQ wrote:
So… 368,000 lose their jobs for the first time, but last week we heard only about 170,000 new jobs created… …and you say the economy is recovering?
How about population growth? How many of the new jobs went to H1B via holders (foreign immigrants)?
We are on an escalator to the economic basement. We may be facing “up”, making baby steps “forward”, but the escalator is taking us down.
And balance of payments went down… …yea, we imported less oil as a result of being too poor to drive as much this summer and because the Obama EPA failed to block fracking on private land soon enough to cut off increases in domestic production.
If we were too poor to drive at all, oil imports would go to zero, ending the balance of payments deficit. Would Obama then cheer at this as a sigh of “recovery”?
No, these numbers are not a sign of a turn around.

Aug 09, 2012 10:42am EDT  --  Report as abuse
KarlQ wrote:
KarlQ… Gotta love those spelling correctors: H1B “visa” not “via”, “sign” of recovery, not “sigh” of recovery! :-)

Aug 09, 2012 11:01am EDT  --  Report as abuse
elizlarfuller wrote:
The primary reason for the shrinkage of the trade deficit appears to be that wholesalers and retailers are importing less than normal volume of consumer products for sale during the upcoming Holiday Season in the US. Recent retail sales, including autos, have disappointing in terms of “no growth” in unit volumes. So why should consumer goods sellers load up for a robust Holiday sales season which is unlikely to emerge with concerns primarily about relatively large percentage increase in household taxes as we enter 2013.

Aug 09, 2012 11:30am EDT  --  Report as abuse
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