* Pending home sales rise 5.2 percent in July
* New jobless claims fall 6,000 but still high
* Second-quarter productivity revised downward
* Unit labor costs up 1.1 pct, fastest rate since Q4 2008
(Updates markets to close)
By Lucia Mutikani
WASHINGTON, Sept 2 Pending sales of previously
owned U.S. homes rebounded unexpectedly in July and new claims
for jobless benefits fell last week, helping quell fears the
economy could face a double-dip recession.
The data released on Thursday, including sturdy sales from
U.S. retailers last month, followed a report on Wednesday
showing a surprising gain in manufacturing and suggested the
economy retained some underlying strength.
"This is an economy that has hit a soft patch. It's not an
economy that appears to be heading towards a double-dip
recession," said Brian Levitt, an economist at OppenheimerFunds
in New York.
Investors appeared to agree that fears of a double-dip
recession might have been overdone as they sold U.S. government
debt for a second straight day and bought stocks. The broad
Standard & Poor's 500 Index .SPX ended up 0.91 percent.
The National Association of Realtors' Pending Home Sales
Index, based on contracts signed, rose 5.2 percent in July from
June. Analysts had expected the index, which leads actual sales
by a month or two, to fall 1 percent.
Home sales have dropped sharply since a popular tax credit
for home buyers ended in April and the surprise gain in pending
sales raised hopes the sector could soon stabilize.
A separate report from the Labor Department showed initial
claims for state unemployment benefits dropped for a second
straight week last week, slipping 6,000 to 472,000.
RETAILERS POST STRONG SALES
Investor sentiment was also lifted by better-than-expected
August data reported by retailers which showed sales getting a
lift as consumers sought bargains during the key back-to-school
selling season. For more see [ID:N02146293].
Jobless claims graphic: link.reuters.com/pug98n U.S.
August same-store sales: link.reuters.com/myk98n
Pending home sales graphic: link.reuters.com/pan98n
While new jobless claims declined last week, they are still
high for this stage in the recovery. Two weeks ago they hit a
nine-month high and they remain above where they stood at the
beginning of the year.
"We're still uncomfortably high given where we are at this
juncture of the recovery, but that we're moving towards 400,000
rather than 500,000 is indicative of at least some measure of
job creation," said Mark Luschini, chief investment strategist
at Janney Montgomery Scott in Philadelphia.
The government is expected to report on Friday that nonfarm
payrolls dropped 100,000 in August, the third straight month of
job declines, with private sector employment increasing only
41,000, according to a Reuters survey. [ID:nN31235915]
The claims data offered few hints of whether those
forecasts are on track, since it fell outside the survey period
for the closely watched monthly jobs report.
The weak labor market threatens to derail the U.S.
economy's recovery from the most painful recession since the
Great Depression. Growth is losing steam as the boost from a
$814 billion government stimulus package and the rebuilding of
inventories by businesses fade.
FED WATCHING RECOVERY
The Federal Reserve has acknowledged the slowing recovery
pace but the minutes of the U.S. central bank's last policy
meeting released this week showed several policymakers felt the
outlook would have to deteriorate "appreciably" to spur fresh
Growing unease over the economy's health and the high
unemployment rate are weighing on President Barack Obama's
popularity and dimming the Democratic Party's prospects of
keeping control of Congress in November's mid-term elections.
The economy grew at a 1.6 percent annualized rate in the
second quarter, less than half the 3.7 percent pace seen in the
The lackluster recovery was underscored by a second report
from the Labor Department on Thursday that showed U.S. business
productivity contracted at an annual rate of 1.8 percent in the
second quarter, instead of the previously reported 0.9 percent.
It was the largest decline since the third quarter of 2006.
While falling productivity will hurt corporate profits,
some analysts said it also signaled job growth was imminent.
"When productivity peaks and starts to go lower, it means
that businesses have basically gotten as much out of their
workers as they can and usually that is a pretty good indicator
for future job creation," said OppenheimerFunds' Levitt.
The report showed unit labor costs, a gauge of potential
inflation pressures, rose at a 1.1 percent rate rather than the
previously estimated 0.2 percent. It was the biggest increase
since the fourth quarter of 2008.
Other data on Thursday showed new orders received by U.S.
factories edged up 0.1 percent last month after falling 0.6
percent in June. [ID:nN02208367]
(Additional reporting by Glenn Somerville in Washington and
Ryan Vlastelica in New York; Editing by James Dalgleish)