Employment remains sluggish and with new home sales dropping in May the economic recovery outlook has slowed but not stalled. This article from Associated Press writers – Christopher S. Rugaber and Daniel Wagner reports on business spending, jobless rate and the fluctuating financial market.
Businesses spend more on durable goods in May
WASHINGTON – Businesses spent more on big-ticket goods in May and the pace of layoffs slowed in the past week, the latest evidence that the economy is gradually improving.
Overall, factory orders for durable goods fell 1.1 percent last month, the Commerce Department said Thursday. But that was largely the result of a drop in demand for commercial aircraft.
Excluding the volatile transportation sector, orders rose 0.9 percent after falling in April. Contributing to the strength was a 2.1 percent increase in business spending.
Meanwhile, the number of people filing first-time claims for jobless benefits fell last week by 19,000, the largest drop in two months.
New claims declined to a seasonally adjusted 457,000, the Labor Department said. That’s about the same level that they were at the beginning of the year. The four-week average dipped to 462,750, the first drop in six weeks.
The stubbornly high level of requests for jobless aid is a sign hiring remains weak even as the economy recovers. Initial claims have dropped steadily after reaching a peak of 651,000 in March 2009. But claims need to fall closer to 425,000 to signal sustained job growth, many economists say.
The reports come amid mixed news on the health of the economic recovery. New home sales tumbled in May after government incentives for homebuyers expired and sales of previously owned homes also fell last month.
The Federal Reserve on Wednesday provided a more cautious outlook while keeping interest rates near record lows. The Fed said the economic recovery is “proceeding,” a more reserved judgment than in April when it said economic activity had strengthened.
“The double-dip fears should be eased somewhat after today’s reports,” Jennifer Lee, an economist at BMO Capital Markets, wrote in a note to clients.
Employment is likely to remain sluggish. Economists at Deutsche Bank forecast that the June jobs report, due next week, will show employers cut 150,000 jobs after five months of gains. Those losses will reflect layoffs of temporary census workers. Private companies are expected to add 100,000 jobs, but gains at that pace aren’t sufficient to reduce the unemployment rate.
