- The Washington Times - Sunday, May 4, 2003

Economic recovery fragile due to lack of confidence
  New claims for jobless benefits clocked in at the second-highest level of the year and manufacturing shrank, signs that the postwar economy is still struggling.
  The stagnant job market and the battered manufacturing sector are sore spots for the fragile recovery.
  “They are casting a big pall upon the economy,” said Richard Yamarone, economist with Argus Research Corp.
  Although new claims for unemployment insurance dropped by a seasonally adjusted 13,000 for the workweek ending April 26, the level of claims — 448,000 — was still the second highest this year, the Labor Department reported yesterday.
  For 11 straight weeks, jobless claims have been above the 400,000 mark, a level indicative of a weak labor climate.
  “Businesses have not yet regained enough confidence or motivation to slow layoffs and resume hiring,” said Maury Harris, chief economist at UBS Warburg.
  Manufacturing, meanwhile, not only failed to pick up in April, but also fell for the second straight month.
  The Institute for Supply Management’s manufacturing index fell to 45.4 last month, slipping from 46.2 in March. A reading below 50 indicates that manufacturing activity is contracting; above 50 signals that the industry is busier or growing.
  “The manufacturing sector remains a basket case, and it will be interesting to see how long it takes before we see a turnaround here,” said Joel Naroff, president of Naroff Economic Advisors.
  Other economic news yesterday also was a bit discouraging.
  Construction spending declined 1 percent in March, the largest drop in seven months, the Commerce Department reported. Much of the weakness came from a decrease in spending on big government projects, such as highways and schools. Spending on commercial ventures, such as office buildings, by private builders also was lackluster.
  U.S. productivity, however, rose at an annual rate of 1.6 percent in the first three months of the year as companies produced more while they kept work forces lean. That growth rate was less than analysts had expected but was an improvement from the prior quarter’s 0.7 percent rate.
  Workers lost ground in wages in the first quarter. Hourly compensation adjusted for inflation fell at a rate of 0.3 percent, compared with a 1.9 percent growth rate in the fourth quarter of last year.
  In the layoffs report, the more stable, four-week moving average of jobless claims, which smooths out weekly fluctuations, went up last week by 1,250 to 442,000. That marked the highest level in just over a year.
  “The persistent high level of new claims for unemployment insurance suggests that firms may still be finding it possible to meet their customers’ tepid increases in demand with a leaner work force,” Federal Reserve Chairman Alan Greenspan said Wednesday, when he gave House lawmakers an updated picture of the recovery.
  Mr. Greenspan said the economy gradually should grow stronger with the end of the combat phase in the Iraq war. Many private economists are hopeful that a material rebound in economic activity will develop in the second half of the year.
  Even if that happens, the nation’s unemployment rate probably will creep up because job growth won’t be strong enough to accommodate all the additional job seekers who will enter the market, attracted by an improved climate.
  Economists have predicted that the jobless rate for the past month will nudge up to 5.9 percent or 6 percent, from the rate of 5.8 percent in March.

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