WASHINGTON — The picture of an economy growing modestly without producing inflation yet struggling to create jobs emerged from government reports Thursday
WASHINGTON — The picture of an economy growing modestly without producing inflation yet struggling to create jobs emerged from government reports Thursday. The number of newly laid-off workers requesting jobless benefits fell slightly last week for the third straight time. But initial claims remain above levels that would signal net job gains. New claims for unemployment aid fell 5,000 to a seasonally adjusted 457,000, the Labor Department said. That nearly matched analysts’ estimates of 455,000, according to Thomson Reuters. The four-week average of jobless claims, which smooths out volatility, dropped to 471,250. Still, the average has risen by 30,000 since the start of this year. That’s raised concerns among economists that persistent unemployment could weaken the recovery. The average number of weekly jobless claims remains above the 400,000-to-425,000 level that many economists say it must fall below before widespread new hiring is likely. Initial jobless claims are considered a gauge of the pace of layoffs and an indication of companies’ willingness to hire. High unemployment has persisted even though the economy grew in the second half of last year. President Barack Obama on Thursday signed into law a package of tax breaks and spending designed to encourage companies to start hiring. In a separate report, the Labor Department said consumer prices were flat in February. A rise in food prices was offset by a drop in gasoline and other energy costs. Excluding the volatile food and energy categories, the core Consumer Price Index edged up just 0.1 percent last month, matching economists’ estimates. The report adds to evidence that the weak economy has all but erased inflation. That allows the Federal Reserve to continue its efforts to revive the economy by keeping the short-term interest rate it controls at a record low near zero. In another report, a private research group said its gauge of future economic activity rose just 0.1 percent in February, suggesting slow growth this summer. The gain in the Conference Board’s index of leading economic indicators was the smallest in 11 months. The index is intended to forecast economic activity in the next three to six months based on a variety of economic data. Also, the current account trade deficit widened in the fourth quarter, the Commerce Department said, reflecting an improving economy. Imports of oil, autos and other products outpaced gains in U.S. exports. But the trade gap for all of 2009 fell to its lowest point in eight years. Economists say they think the deficit will widen during 2010, though not to the record heights seen before the recession. A weaker dollar is expected to boost U.S. exports. A weaker dollar makes U.S. goods cheaper overseas and foreign goods costlier for U.S. consumers. The current account is the broadest gauge of trade because it includes not only trade in goods and services but also investment flows between countries. It measures how much the country must borrow from foreigners. In the Labor Department report, the number of people continuing to claim unemployment benefits rose slightly to 4.58 million. That was similar to what economists expected. But it doesn’t include millions of people who are receiving extended benefits for up to 73 extra weeks, on top of the 26 weeks customarily provided by the states. More than 6 million people were on the extended benefit rolls for the week that ended Feb. 27, the latest data available. That is about 300,000 more than in the previous week. The total number of people receiving benefits now tops 11.2 million. Over the past two months, "this measure has gone nowhere but up," Dan Greenhaus, chief economic strategist at Miller Tabak, wrote in a note to clients. "We believe it will moderate through the spring, but the larger story, that people are simply not finding jobs, remains in place." The nation’s gross domestic product, the broadest measure of output, rose 5.9 percent in the fourth quarter, the fastest pace in six years. But much of that growth reflected a one-time gain from companies restocking their inventories. Many economists expect the growth rate to drop to about 3 percent in the current January-to-March quarter. The unemployment rate was 9.7 percent in February, the same as the previous month, down from a peak of 10.1 percent last October. Still, the Federal Reserve and most private economists expect it to remain well above 9 percent throughout this year. The Fed said Tuesday that "the labor market is stabilizing." That’s an improvement from its previous diagnosis in January, when it said its deterioration "is abating." At least one company, FedEx, says the global economic recovery is broadening. Fred Smith, CEO of the world’s second-largest package delivery company, on Thursday predicted a relatively strong first half and steady growth in the last six months of the year. FedEx expects U.S. growth of about 3 percent this year, led by manufacturing, in line with economists’ expectations. Still, Smith warned that the housing market "could remain a problem." Among states, North Carolina had the largest increase in jobless claims last week, with 5,100. It attributed the increase to layoffs in the construction, apparel and industrial machinery industries. Illinois, Oregon, Ohio and Alabama had the next-largest increases. The state data lags one week behind the initial claims figures. New York had the largest drop in claims, with 10,929. It cited fewer layoffs in transportation and services. California, Connecticut, Kentucky and West Virginia also reported declines. Copyright 2010 The Associated Press.