Jobless Claims Rise, Factory Orders Fall
The Labor Department reported Thursday that new applications for unemployment insurance rose by a seasonally adjusted 16,000 to 442,000 for the work week ending May 31. The increase pushed claims to their highest level since the week ending April 26.
Separately, the nation's largest retailers reported modest sales gains for May. But shoppers weren't in the mood to splurge. Rainy weather in certain regions, including the Northeast, and a weak job market limited spending for yet another month.
In another report, orders to U.S. factories fell 2.9 percent in April from March, marking the largest decline in 17 months, the Commerce Department said. The decrease was a lot deeper than the 1.8 percent drop economists were forecasting.
Manufacturing, which has slashed jobs and cut production, has been a major trouble spot for the economy.
However, a more forward-looking report released Monday suggested that manufacturing may be poised for a turnaround. The Institute for Supply Management reported factory activity declined at a much slower rate in May, offering a heartening sign to economists.
Still, the latest batch of economic news Thursday sent stocks lower. The Dow Jones industrial average was down 32 points and the Nasdaq was off 5 points in morning trading.
Last week's rise in jobless claims surprised economists, who were predicting they would fall to 421,000. However, some of last week's sharp increase in claims probably reflected seasonal adjustment difficulties related to the Memorial Day holiday, a Labor Department analyst said.
Even so, for 16 straight weeks new claims have been running above the 400,000 mark -- a level associated with a largely stagnant job market, economists say. The more stable, four-week moving average of new claims, which smooths out week-to-week fluctuations, rose last week by 3,000 to 430,500, the highest level in two weeks.
The nation's jobless rate jumped to 6 percent in April as businesses cut 48,000 jobs. The economy has lost a half million jobs in the last three months, a decline usually associated with recessions.
Economists predict the unemployment rate rose to 6.1 percent for May and that another 30,000 jobs were eliminated during the month. The employment report for May is released by the government on Friday.
Even if the economy improves in the second half of this year, as economists hope, the jobless rate is expected to move higher -- to around 6.3 percent to 6.5 percent later this year.
Job growth probably won't be strong enough to accommodate all the additional job seekers who would enter the market, attracted by an improved climate, economists say. That would contribute to a rise in the unemployment rate.
Federal Reserve Chairman Alan Greenspan has called recent reports on the nation's employment situation weak.
The sluggish job market so far hasn't caused consumers -- the main force keeping the economy going -- to shut their pocketbooks and wallets. But they are being more selective. Low interest rates, a refinancing boom that has left people with extra cash and solid home values are some of the factors offsetting the negative forces of the sluggish job market.