Job market improvement may be slowing, data show
AP Business Writers
WASHINGTON (AP) – The job market isn’t improving as fast as some analysts had expected.
That was the message Thursday in a government report that the number of people filing first-time claims for unemployment benefits rose unexpectedly last week. Jobless claims rose by 31,000 to a seasonally adjusted 473,000.
The increase followed a drop of 41,000 in the previous week. The earlier figure had raised hopes that the job market was improving steadily.
The four-week average for claims dipped 1,500 to 467,500, near the lows at the end of last year. The average smooths out week-to-week volatility. But many economists say the four-week average would need to fall consistently below 425,000 to signal that the economy is close to generating net job gains. The economy has lost 8.4 million jobs since the recession began in December 2007.
Further evidence that the pace of the economic recovery is slowing was a private research group’s forecast of economic activity. The Conference Board’s index of leading economic indicators rose for a 10th straight month in January, but the rate of increase is easing. The index is designed to forecast activity in the next three to six months.
Many economists have raised concern that growth will stagnate this year as government support programs wind down and unemployment remains high.
Analysts say the closing of businesses and government offices last week because of snowstorms might have prevented some newly unemployed workers from filing their initial claims for unemployment benefits.
The figures were collected as the government also was gathering information for the February report on the unemployment rate and employer payrolls. The severe weather may distort those figures, too, economists said. That could make it hard to get an accurate picture of the job market for several weeks.
Even so, some analysts said the latest figures are a cautionary signal.
“At least for the moment, the trend in layoffs seems at best to have leveled off – and perhaps to have begun a renewed increase,” Pierre Ellis, an economist at Decision Economics, wrote in a research note.
Manufacturing has been among the few pockets of strength in the economy. But many other industries in the much larger service sector remain weak.
“Strong manufacturing is not enough to support the labor market as a whole, it seems,” said Ian Shepherdson, an economist at High Frequency Economics.
A third report Thursday said wholesale prices shot up at double the expected pace in January. But the surprising surge was viewed as a temporary blip and not a signal of sustained inflation. The Labor Department said wholesale prices rose 1.4 percent. But most of the increase was due to jump in gasoline prices, which surged 11.5 percent.
Core inflation at the wholesale level, which excludes energy and food, rose 0.3 percent. But that, too, was due mainly to a single volatile category: light trucks.
Over the past 12 months, core prices at the wholesale level have risen a moderate 1 percent. Most economists say inflation is unlikely to become a threat any time soon because of downward pressures on wages and prices from layoffs and fear of further job losses.
Paul Ashworth, senior U.S. economist at Capital Economics, said the prolonged recession has acted to dampen a broad range of prices. He noted that a year ago, core wholesale prices were rising at 12-month rates that were as high as 4.2 percent, compared with the 1 percent increase currently.
Over the past 12 months, wholesale prices are up 4.6 percent, the largest 12-month increase since a 5.2 percent rise in the 12 months ending in October 2008. But the price pressures are coming primarily from big increases in the cost of energy.
Food prices rose 0.4 percent in January following a 1.3 percent jump in December. Last month, the price increases came in meat, up 3 percent, processed poultry, up 2.3 percent and milk products, which rose 1.7 percent.
The absence of inflation pressures has allowed the Federal Reserve to keep interest rates low in an effort to spur economic growth.
The central bank released the minutes of its Jan. 26-27 meeting on Wednesday. At that meeting, Fed officials kept the target for the federal funds rate, the interest that banks charge on overnight loans, at zero to 0.25 percent, where it has been since December 2008. They repeated their pledge to keep rates “exceptionally low” for an “extended period.”
Fed Chairman Ben Bernanke suggested last week that the Fed was still months away from raising rates.
Many private economists believe that the Fed’s first rate increase will not come until the second half of this year. And some believe the central bank could keep rates unchanged for the entire year, given the absence of inflation and what they believe will be a sluggish recovery.