Archive for June, 2010

New claims for jobless benefits rise sharply (AP)

Thursday, June 17th, 2010 | Finance News

WASHINGTON – The number of people filing new claims for jobless benefits jumped last week after three straight declines, another sign that the pace of layoffs has not slowed.

Initial claims for jobless benefits rose by 12,000 to a seasonally adjusted 472,000, the Labor Department said Thursday. It was the highest level in a month and overshadowed a report that consumer prices remain essentially flat.

First-time jobless claims have hovered near 450,000 since the beginning of the year after falling steadily in the second half of 2009. That has raised concerns that hiring is lackluster and could slow the recovery.

The four-week average for unemployment claims, which smooths volatility, dipped slightly to 463,500. That's down by 3,750 from the start of January.

A lack of robust job growth has kept the recovery from gaining strength. Kevin Logan, an economist with HSBC Securities, said many economists have been expecting claims to fall below 450,000 for several weeks now.

"The wait is getting longer and longer," said Logan. "As each week goes by, doubts about the underlying strength of the economic expansion grow."

Economists say they will feel more optimistic that the economy is creating jobs once initial jobless claims fall below 425,000 per week.

A separate Labor report said consumer prices fell for the second straight month. The 0.2 decline in the Consumer Price Index was pulled down falling energy prices — most notably a 5.2 percent drop in gasoline prices. Declining energy bills were the main factor pulling down prices.

But core consumer prices, which strip out volatile energy and food, edged up 0.1 percent in May, after being flat in April. Core prices are up only 0.9 percent over the past year — below the Fed's inflation target.

Additionally, the Commerce Department said Thursday that the broadest measure of U.S. trade rose during the first quarter to the highest point in more than a year. Much of the widening deficit was due to higher prices on imported oil during the first three months of the year. Those prices have since come down.

And a private research group said its gauge of future economic activity rose 0.4 percent in May, signaling slow growth in the U.S. economy through the fall. Turmoil in stock markets and a troubled housing market weighed on the Conference Board's leading economic index, while measures related to interest rates and an increasing amount of money in the economy tugged it higher. The index is designed to forecast activity in the next three to six months.

Still, layoffs remain one of the biggest concerns for the recovery. Just this week, casino owner Wynn Resorts laid off more than 260 workers in its two Las Vegas casino hotels in a move expected to save nearly $8 million.

The number of people continuing to claim benefits rose by 88,000 to 4.57 million. That doesn't include about 5.2 million people who receive extended benefits paid for by the federal government.

Congress has added 73 weeks of extra benefits on top of the 26 weeks typically provided by states. All told, about 9.7 million people received unemployment insurance in the week ending May 29, the most recent data available.

The extended benefit program expired this month. The House has approved an extension of the benefits through November. The Senate has yet to act.

On Wednesday, Senate Republicans and a dozen Democratic defectors rejected a catchall measure combining jobless aid for the long-term unemployed, aid to cash-strapped state governments and the renewal of dozens of popular tax breaks. Despite the loss, Democratic leaders predicted that a scaled-back version of the measure could pass, possibly later this week.

Adding to worries about the job market, the Labor Department said earlier this month that the economy generated only 41,000 private-sector jobs in May. That was down from 218,000 in April.

Temporary hiring by the Census Bureau added another 411,000 jobs. The unemployment rate fell to 9.7 percent from 9.9 percent.


AP Business Writers Jeannine Aversa and Martin Crutsinger in Washington and Tali Arbel in New York contributed to this report.

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Leading indicators rise 0.4 percent in May (AP)

Thursday, June 17th, 2010 | Finance News

NEW YORK – A gauge of future economic activity rose 0.4 percent in May, signaling slow growth in the U.S. economy lies ahead in the summer and fall.

The leading economic index from the Conference Board, a private research group, is designed to forecast economic activity in the next three to six months.

Economists polled by Thomson Reuters had expected an increase of 0.5 percent in May.

The index has been mostly rising since April 2009, tugged higher by the increasing amount of money in the economy, the rebound in manufacturing and slow improvements in the job market.

Another big boost to the leading indicators has been the difference between 10-year interest rates and the overnight interest rate that the Federal Reserve has kept at a record low near zero. A wide gap between the two can mean investors expect economic activity to pick up.

A stock market rally for much of last year and a boost to the housing market from a federal tax credit, now expired, had also helped.

But turmoil in stock markets and renewed weakness in the housing market weighed on the index in May. Without government tax support for homebuyers, applications to build homes are sliding again. A debt crisis and the prospect of stagnating economies in Europe spooked investors, triggering volatile trading in stock markets.

Five of the index's 10 components improved last month, and five deteriorated.

"The index points to continued, though slower, U.S. growth for the rest of the year," said Bart Van Ark, chief economist of the Conference Board, in a statement. "We project a serious slowdown in European growth in 2011, which could further weaken the U.S. outlook."

The Conference Board revised its reading for April to no change from a 0.1 percent drop. It also revised its March reading to a 1.4 percent gain from a 1.3 percent rise.

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Texas lawmaker accuses White House of BP shakedown (AP)

Thursday, June 17th, 2010 | Finance News

WASHINGTON – A leading House Republican accused the White House Thursday of a "$20 billion shakedown" of oil giant BP by requiring the company to establish a huge fund to compensate those hurt by the Gulf Coast oil spill.

Rep. Joe Barton made the assertion at the outset of a House hearing where BP's chief executive officer, Tony Hayward, was appearing for the first time before Congress.

Facing Hayward at the witness table, the Texas Republican congressman said, "I'm ashamed of what happened in the White House" on Wednesday. Barton was referring to the agreement that President Barack Obama announced with BP for establishment of a $20 billion relief fund.

Rep. Ed Markey sharply disagreed with Barton.

Markey said the compensation fund was "not a slush fund, not a shakedown. ... It was the government of the United States working to protect the most vulnerable citizens that we have in our country right now, the residents of the Gulf."

"It's BP's spill," the Massachusetts Democrat said, "but it is America's ocean, and it is America's citizens who are being harmed. ... No, this is not a shakedown of the company."

"This is, in my opinion, the American government working at its best."

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