The Labor Department reported Thursday that new applications filed for unemployment insurance fell by a seasonally adjusted 58,000 to 346,000 for the week ending July 5. A year ago, the figure was lower, at 304,000, showing a deterioration in employment conditions.
A government analyst cautioned that last week's drop did not suggest a sudden improvement in the country's overall economic health. The decline was exaggerated because of adjustment problems related to temporary shutdowns at auto plants for retooling new assembly lines. The unadjusted, or actual raw figures, showed an increase of 30,000 claims for last week.
Employers have been chafing under high energy prices and fallout from the housing and credit crises. As they try to cope with those problems and squeezed profits, they have cut back on hiring and other types of investments.
Economists were forecasting claims to dip to 395,000 last week, from a spike of 404,000 in the previous week.
"The underlying trend in claims is upwards and today's number is noise, nothing more," said Ian Shepherdson, chief economist at High Frequency Economics.
The number of people continuing to draw unemployment benefits jumped by 91,000 to 3.2 million for the week ending June 28, the most recent period for which that information is available. That increase left such filings at the highest level since late December 2003. A year ago, the figure stood at 2.5 million.
Cautious employers have cut jobs for six months straight, bringing total losses to 438,000 so far this year, the government reported last week. The economy needs to generate more than 100,000 new jobs a month for employment to remain stable.
The jobless rate in June held steady at 5.5 percent after jumping in May by the most in two decades. However, the unemployment rate is expected to climb to 6 percent or higher by early next year.
Another report Thursday showed shoppers were in the buying mood — armed with extra cash from the government's rebate checks and enticed by heavy discounts.
The nation's retailers on Thursday reported a better-than-expected June gain of 4.3 percent, with discount giant Wal-Mart Stores Inc. accounting for the majority of the gain.
Economic growth in the April-to-June quarter appears to be shaping up better than most people had thought earlier this year, thanks to the energizing force of the tax rebates. However, some analysts worry that the economy could be in for another rough patch later this year as the stimulus fades.
Consumer spending is a major driver of overall economic activity and thus is closely watched by economists.
Federal Reserve Chairman Ben Bernanke, appearing on Capitol Hill Thursday, said the government's $168 billion stimulus package, is helping. But he suggested Congress shouldn't rush ahead with another package, as championed by Democrats. "My inclination would be wait and see a bit longer" to get a better sense of whether the economy can strengthen on its own, he said.
The Fed recently ended a nearly year-long campaign of rate reductions to shore up the economy. It did so out of fears that high energy and food prices could spread inflation through the economy.
Bernanke and his colleagues are in a difficult spot. Additional rate cuts would worsen inflation. But boosting rates too soon would hurt the fragile economy.
Stocks rose on Thursday, helped by
optimism about a major deal in the chemicals sector and after
the Federal Reserve chairman said the central bank and the
government are focused on stabilizing the financial system.
Dow Chemical's $15.3 billion bid for Rohm and Haas (ROH.N)
gave investors confidence that there was value in the sector.
Rohm and Haas stock soared 64 percent and was one of the top
advancers in the S&P 500.
Federal Reserve Chairman Ben Bernanke and U.S. Treasury
Secretary Henry Paulson told Congress they were doing
everything possible to restore calm to financial markets, but
stressed to lawmakers that a longer-term regulatory overhaul
was vital to avert future crises.
Alcoa (AA.N) helped drive the Dow upward after aluminum
prices hit an all-time high on output cuts in top producer
China. Apple's (AAPL.O) stock rose, lifting the Nasdaq, a day
before it is set to launch the latest version of its popular
But a $5.60 jump in the price of oil amid threats to
production in Nigeria and Brazil and an additional missile test
by Iran kept the stock market's gains in check. The higher oil
prices raised concerns about consumer spending and corporate
profits, hurting sectors from retailers to automakers.
"Bernanke and Paulson are, in essence, trying to calm the
market," said Bucky Hellwig, senior vice president at Morgan
Asset Management, in Birmingham, Alabama.
The Dow Jones industrial average (.DJI) rose 81.58 points,
or 0.73 percent, to 11,229.02, while the Standard & Poor's 500
Index (.SPX) gained 8.70 points, or 0.70 percent, to 1,253.39.
The Nasdaq Composite Index (.IXIC) was up 22.96 points, or 1.03
percent, to close at 2,257.85.
The gains came a day after the S&P 500 joined the Dow
industrials and the Nasdaq in a bear market.
But financial stocks were under pressure again on concerns
that the sector may need additional capital to withstand the
ongoing credit crisis. Shares of the top two U.S. mortgage
finance companies Freddie Mac (FRE.N) and Fannie Mae (FNM.N)
were the hardest hit by those fears. Freddie Mac dropped 22
percent to $8 and Fannie Mae lost 13.8 percent to $13.20.
Lehman Brothers (LEH.N) stock slid 12.4 percent to $17.30,
but closed off its session low at $15.73. Pimco, the world's
biggest bond fund, said it continued to trade normally with
Lehman Brothers, as rumors that it had pulled business away
from the investment bank clobbered Lehman's shares.
In the latest snapshot of the U.S. economy, June retail
sales figures sounded a positive note. Summer weather,
aggressive promotions and tax rebates sent many U.S. consumers
shopping in June, giving retailers struggling in the weak
economy their strongest month in more than a year.
Despite the overall good news, the Standard & Poor's Retail
Index (.RLX) fell 3.2 percent as investors, who were expecting
a sales boost from the tax rebates, worried about its fleeting
nature, said Joseph Feldman, a retail analyst with Telsey
The jump in oil prices further weighed on the retail
Shares of automakers fell, with General Motors (GM.N) down
6.2 percent at $9.69. Airlines also suffered, with an airline
index (.XAL) down 1.5 percent.
Alcoa shares rose 9.7 percent to $34.60 on the New York
Energy companies' shares climbed, with Exxon Mobil (XOM.N)
gaining 2.1 percent to $86.06. U.S. crude oil gained
$5.60 to settle at $141.65 a barrel, reflecting investors'
nervousness about Iran's missile tests and supply concerns
related to Nigeria and Brazil.
In the day's major acquisition, Dow Chemical shares fell
4.2 percent, while Rohm & Haas rose 64.2 percent to $73.62. Dow
Chemical's bid to buy Rohm & Haas is valued at $15.3 billion;
including Rohm & Haas debt, the deal size rises to $18.8
Apple shares gained 1.4 percent to $176.63 on the Nasdaq,
while shares of AT&T (T.N),the exclusive carrier for the iPhone
in the United States, jumped 2 percent to $32.77 on the NYSE.
Apple's new iPhone is expected to attract hordes of buyers
when it goes on sale on Friday in more than 20 countries,
them by the end of 2008.
Trading was moderate on the NYSE, where about 1.53 billion
shares changed hands, below last year's estimated daily average
of 1.90 billion, while on the Nasdaq, about 2.30 billion shares
traded, above last year's daily average of 2.17 billion.
Advancers outnumbered decliners on the NYSE by 16 to 15,
while on the Nasdaq, about four stocks rose for every three
(Editing by Jan Paschal)
Costco Wholesale Corp (COST.O) and
BJ's Wholesale Club Inc (BJ.N) on Thursday reported strong June
sales as gas prices and food sales boosted results at the
warehouse club operators.
Costco, the No 1 U.S. warehouse club operator, posted a 9
percent rise in June sales at stores open a least a year, or
comparable-club sales, while BJ's, the No 3 U.S. warehouse club
operator, had a 16.5 percent sales increase on that basis.
Comparable-club sales at No. 2 U.S. warehouse club Sam's
Club, a division of Wal-Mart Stores Inc (WMT.N), rose 8.3
percent, including fuel sales.
Ken Perkins, president of Retail Metrics, said in a note
that shoppers were looking for bargains to offset the "painful
affects" of record gas and food prices.
He said Costco's 9 percent June comparable-club sales were
"very impressive given the current retail backdrop."
Customers pay an annual fee to shop at warehouse clubs and
they get discounts on everything from cameras to bulk-sized
packages of paper towels. The clubs have also increased the
selection of fresh and prepared food.
Many warehouse locations also operate gasoline stations
where less expensive fuel is sold, which helps to bring
customers into the clubs.
Costco's comparable-club sales at its U.S. locations rose 9
percent. About 4 percentage points of that came from higher gas
prices, with an average price per gallon of $4.03 in June, up
from $2.93 a gallon last year, the company said.
Excluding gas sales, BJ's said its comparable club sales
rose 8.3 percent, while Sam's Club's sales rose 4.6 percent
SMALL BUSINESSES ALSO BENEFIT
Sam's Club chief executive officer Doug McMillon said in a
statement that its small business shoppers were "especially
price conscious" in this environment. And he said sales at
Sam's Club were still shifting toward fuel, food and consumable
items, like household cleaners.
BJ's said comparable-store sales of food in June rose
roughly 11 percent, driven by strong demand for perishable
goods, while Costco said its food business had a
high-single-digit rise in comparable store sales.
"We are, of course, benefiting from some inflation on the
food side as a result of recent run up in costs of commodities
and the continued run-up in cost of oil and gasoline," Costco
said on a recorded call.
Costco said sales were weaker in the month for televisions
and computers, while BJ's said electronics, jewelry, and
televisions were among its weaker departments.
Costco's total sales for the five weeks ended July 6 rose
12 percent to $7.14 billion. Its international division
comparable store sales rose 11 percent, but on a local currency
basis, it said those sales were up 8 percent.
BJ's total sales for the five weeks ended July 5 rose to
$1.05 billion from $887 million, while Sam's Club total sales
rose for the five weeks ended July 4 rose to $4.81 billion from
(Reporting by Nicole Maestri; Editing by Toni Reinhold)