First-time jobless claims up

UPDATED:

Laid-off workers filing first-time claims for unemployment benefits edged up last week, but claims remained well below the peak levels reached in March, indicating that the recession may be bottoming out and the labor market may be moving toward stability, analysts said.

Initial claims for jobless benefits unexpectedly climbed a modest 4,000 last week, reaching 558,000, the Labor Department reported Thursday. The number of people collecting regular, continuing unemployment benefits declined by 141,000 to 6.2 million for the week ending Aug. 1.

“One week does not a trend make, and the labor market is gradually moving toward stability,” said Andrew Gledhill, an economist at Moody’s Economy.com. “The gain is minor and does not detract from the overall gradual downward trend observed since late March when [initial] claims peaked at 674,000.”

But the labor market has not yet stabilized, Mr. Gledhill emphasized. “Even though progress has been made,” he noted, “there is still a long way to go before the labor market stabilizes,” which would occur when “initial claims reach around 350,000.”

Mr. Gledhill described the 141,000 decline in continuing regular claims as “a phantom signal of labor market improvement, owed primarily to the ongoing trend of the unemployed exhausting benefits and rolling onto supplemental benefit programs.”

For example, an additional 31,000 workers were receiving their benefits under the federal government’s Emergency Unemployment Compensation program, bringing the total to nearly 2.8 million, nearly four times the number who benefited from the EUC program a year ago.

While the labor market appeared to be moving toward stability, consumers retrenched a bit last month as sales at U.S. retailers unexpectedly declined in July despite the flurry of late-month auto purchases in the “cash-for-clunkers” program.

After increasing by an upwardly revised 0.8 percent in June, sales at U.S. retailers declined 0.1 percent in July, the Commerce Department reported Thursday. Compared with July 2008, retail sales last month were down 8.3 percent. Excluding automobiles, purchases fell by 0.6 percent last month.

July sales declined at furniture outlets, gasoline stations, electronics and appliance stores, building material dealers, and food and beverage stores. Sales edged up at clothing stores and at restaurants and bars.

So-called “core sales,” which exclude revenues from gasoline stations and auto dealerships, declined for the fifth month in a row. The year-over-year sales decline in core sales set another record in July.

“Core sales continued to disappoint, setting up a weak third quarter for consumption outside the auto sector,” said Adam G. York, an economist at Wells Fargo. Last month’s unexpectedly large decline in retail sales, excluding autos, resulted from “consumers shift[ing] dollars to pay for their new vehicles instead of other purchases,” Mr. York said.

“The bottom line, however, remains that sales are trending about flat. This is a dramatic improvement from the steady, large declines of the second half of last year and encouraging in the face of ongoing declines in employment and aggregate wage income,” said Scott Hoyt of Moody’s Economy.com.

In a separate report, the Commerce Department revealed that businesses reduced their inventories by 1.1 percent in June, the 10th straight month of decline, as they continued to whittle down their stockpiles to bring them in line with sales.

Import prices declined 0.7 percent in July, the Labor Department reported Wednesday. Import prices were down nearly 20 percent from July 2008 levels, when the price of oil peaked at nearly $150 per barrel. Analysts said declining import prices would reduce inflationary pressures and expectations, helping the Federal Reserve to implement its exit strategy to withdraw the enormous liquidity the central bank injected into the economy to battle the worst economic and financial crises since the Great Depression.