WASHINGTON (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 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.”
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, Gap Inc and J.C. Penney Co Inc 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.
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.
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.
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.
Additional reporting by Glenn Somerville; Editing by Kenneth Barry