Weak economic data suggest recovery is fizzling

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Weak economic data suggest recovery is fizzling

By CHRISTOPHER S. RUGABER, AP Economics Writer S. Rugaber, Ap

Economics Writer – 10 mins ago

WASHINGTON – Fears that the economic recovery is fizzling grew Thursday after

the government and private sector issued weak reports on a number of fronts.

Unemployment claims are up, home sales are plunging without government

incentives and manufacturing growth is slowing.

Meanwhile, 1.3 million people are without federal jobless benefits now that

Congress adjourned for a weeklong Independence Day recess without passing an

extension. That number could grow to 3.3 million by the end of the month if

lawmakers can't resolve the issue when they return.

All of this worries economists. As jobless claims grow and benefits shrink,

Americans have less money to spend and the economy can't grow fast enough to

create new jobs. Some are revising their forecasts for growth in the third

quarter. Others are afraid the country is on the verge of falling back into a

recession.

" We find the level and direction in jobless claims somewhat troubling and the

increase is likely to feed double-dip fears, " said Ryding, an economist at

RDQ Economics in a note to clients.

New claims for benefits jumped by 13,000 to a seasonally adjusted 472,000, the

Labor Department said Thursday. The four-week average, which smooths

fluctuations, rose to 466,500, its highest level since March.

Claims have remained stuck above 450,000 since the beginning of the year.

Requests for unemployment benefits dropped steadily last year after reaching a

peak of 651,000 in March 2009. Economists say they will feel more confident

about sustained job growth when initial claims fall below 425,000

Adding to that is the growing number of people who stand to lose government

support while they search for work.

For the third time in as many weeks, Senate Republicans blocked a bill Wednesday

night that would have continued unemployment checks to people who have been laid

off for long stretches. The House is slated to vote on a similar measure

Thursday, though the Senate's action renders the vote a futile gesture as

Congress prepares to depart Washington for its holiday recess.

During the recession, Congress added up to 73 weeks of extra benefits on top of

the 26 weeks typically provided by states. Democrats in the House and Senate

want them extended through November. Republicans want the $34 billion cost of

the bill to be paid for with money remaining from last year's stimulus package.

Democrats argue that it is emergency spending and should be added to the

deficit.

Some economists say they may revise their forecasts for growth in the third

quarter if the benefits are not extended.

" People whose benefits are going to run out will simply not have the spending

power necessary to help drive growth, " said Dan Greenhaus, chief economic

strategist at Tabak.

The housing market is also weighing on the economy. The number of buyers who

signed contracts to purchase homes tumbled 30 percent in May, the National

Association of Realtors said. And construction spending declined 0.2 percent in

May as residential building fell, the Commerce Department said.

Both were affected by the expiration of government incentives to buy homes.

Buyers had until April 30 to sign sales contracts and qualify for tax credits.

The tax credit's impact also showed up in the jobless claims report. Greater

layoffs by construction firms fueled the increase, a Labor Department analyst

said.

Separately, the Institute for Supply Management, an industry trade group, said

its manufacturing index slipped in June. But it is still at a level that

suggests growth in the industrial sector, which has helped drive the economic

recovery.

Surveys released Thursday in China showed a slowdown in factories' growth as

exports faltered and analysts worry that cutbacks in government lending will

cool the economy's rapid rise. Reports from Markit Economics also indicated that

manufacturing sector growth in India, South Korea, Australia and Taiwan was

slowing.

The industrial sector's growth also cooled slightly in the 16 countries using

the euro and the United Kingdom.

The troubling information on the economy comes a day before the Labor Department

is scheduled to release the June jobs report. That is expected to show a modest

rebound in private-sector hiring. Overall, employers are expected to cut a net

total of 110,000 positions, but that includes the loss of about 240,000

temporary census jobs. Private employers are projected to add 112,000 jobs,

according to a survey of economists by Thomson Reuters.

That would be an improvement from May, when businesses added only 41,000

workers. But the economy needs to generate at least 100,000 net new jobs per

month to keep up with population growth, and probably twice that number to bring

down the jobless rate.

The unemployment rate is expected to edge up to 9.8 percent from 9.7 percent in

May.

Layoffs are rising in the public sector, as states and local governments

struggle to close persistent budget gaps. New York City approved a budget

Tuesday that cuts about $1 billion in spending and would eliminate 5,300 jobs

from the city's 300,000-person work force.

___

Associated Press Writer Ohlemacher contributed to this report.