Bloomberg News

U.S. Economy: Jobless Claims Decrease Less Than Forecast

June 02, 2011

(Updates with closing market prices in fifth paragraph.)

June 2 (Bloomberg) -- More Americans than forecast filed applications for unemployment benefits last week, signaling the job market is weakening as employers trim staff to cut costs.

Jobless claims fell by 6,000 to 422,000 in the week ended May 28, exceeding the 417,000 median forecast of economists surveyed by Bloomberg News, according to Labor Department figures today in Washington. Another report showed consumer comfort stabilized last week as gasoline prices retreated.

A pickup in dismissals signals companies will also look to limit hiring, raising the risk that employment data due tomorrow will show payroll gains moderated in May. Slowing job growth may cause households to further curb spending, which accounts for about 70 percent of the world’s largest economy.

“The job market has clearly lost momentum,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets in Boston. “Jobless claims remain elevated, and payrolls growth for May could come in at a level that’s worrisome. The gains in confidence may be short-lived. From here on, confidence surveys may begin to reflect the broader sense of uncertainty in the economy, the labor market and the stock market.”

Stocks fell on concern the economic recovery was slowing. The Standard & Poor’s 500 Index decreased 0.1 percent to 1,312.94 at the 4 p.m. close in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 3.04 percent from 2.94 percent late yesterday.

Survey Results

The median forecast for claims was based on a survey of 50 economists. Estimates ranged from 400,000 to 440,000. The Labor Department revised the prior week’s figure up to 428,000 from the 424,000 initially reported.

Payrolls grew by 170,000 workers last month after increasing by 244,000 in April, Labor Department data may show tomorrow, according to the median forecast of economists surveyed by Bloomberg. The jobless rate dropped to 8.9 percent from 9 percent, according to the survey.

Economists at Goldman Sachs Group Inc. and Deutsche Bank Securities Inc. were among those cutting payroll forecasts yesterday after a report from ADP Employer Services showed companies added 38,000 workers last month, the fewest since September and less than the median estimate in a Bloomberg survey.

“The labor market is a little less robust than it was,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “This is the eighth consecutive week of claims above 400,000, so it doesn’t look like the move up was an aberration.”

Comfort Stabilizes

The Bloomberg Consumer Comfort Index improved to minus 47.1 in the week ended May 29 from minus 48.4 in the prior period. The 2.3-point gain over the past two weeks has yet to make up for the 6.8-point monthlong slide that propelled the gauge to a nine-month low two weeks ago.

“The consumer is not doing very well these days,” said Robert Brusca, president of Fact & Opinion Economics in New York. “ There is nothing in this weekly survey that gives us any confidence things are getting better. There is really not much improvement in the economy.”

Other reports today showed worker productivity slowed in the first quarter and orders to factories dropped in April.

The measure of employee output per hour increased at a revised 1.8 percent annual rate after a 2.9 percent gain in the prior three months, data from the Labor Department showed. Labor costs climbed at a 0.7 percent rate after dropping 2.8 percent the prior quarter.

Fewer Orders

Demand for manufactured goods dropped 1.2 percent in April, the biggest decrease since May 2010, after climbing 3.8 percent the prior month, figures from the Commerce Department showed.

Initial jobless claims reflect weekly firings and tend to rise as job growth -- measured by the monthly non-farm payrolls report -- decelerates.

Some companies are still paring their workforce. Bank of America Corp., the largest U.S. bank by assets, will cut staff in its mortgage-sales unit in the next few months because volume is declining.

Mortgage headcount costs will “flatten out” over time, Chief Executive Officer Brian T. Moynihan said yesterday at a Sanford C. Bernstein & Co. conference in New York.

Lower gasoline prices may be giving households some relief. The average price of a gallon of regular gasoline nationally dropped to $3.79 on May 29, down from $3.84 a week earlier, according to AAA, the nation’s largest auto club. It reached $3.99 on May 4, the highest since July 2008.

Comfort Breakdown

Each of the three components of the Bloomberg comfort index gained last week, today’s figures showed.

The personal-finances gauge rose to minus 13.4 from minus 13.7 the previous week. A 3.1 percentage-point increase in the last two weeks failed to make up for ground lost over the prior four weeks.

The buying-climate index increased to minus 53.1 from minus 55.8 the previous week. It’s still close to the minus 57.4 reached March 13 that was the lowest since October 2009.

A gauge of Americans’ views of the economy was minus 74.6 compared with minus 75.7 the prior week.

“Falling gasoline prices have provided some much-needed breathing space for beleaguered consumers,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. Even so, Americans face “considerable economic headwinds, including a difficult labor market.”

--With assistance from Bob Willis and Chris Middleton in Washington. Editors: Carlos Torres, Vince Golle

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net;

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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