Mixed US economic picture as jobless claims fall back

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A flurry of government data on Thursday showed a mixed picture of the US economy, with higher oil and food costs hitting retail spending and lifting producer prices, while jobless claims fell back from an unexpected spike.

Fewer Americans applied for unemployment insurance last week in a sharp reversal of the recent trend, but claims remain at a high overall level in spite of other signs of an improving labour market.

Separately, retail sales rose in April but higher petrol and food prices sapped spending on discretionary items, while producer prices were pushed up by the higher cost of oil.

First-time claims for jobless benefits fell 44,000 to 434,000 in the week ending May 7, the US labour department said, the steepest drop since February 2010. The decline nearly reversed the spike seen two week ago, which the government had attributed to one-off factors. The drop was in line with expectations.

The less volatile four-week moving average ticked up by 4,500 to 432,250, still well above the 400,000 level considered consistent with jobs growth.

“There is no doubt that over recent weeks seasonal adjustments issues caused noise due to the timing of Easter, but as these higher levels continue to persist it looks as if something more fundamental is going on,” warned Jill Brown, vice-president of economics at Credit Suisse.

But other analysts were more sanguine, following news last Friday that the economy added 244,000 jobs in April.

“With private payroll growth strengthening in April, some of the sting has been removed from the April surge in claims,” said John Ryding and Conrad DeQuadros of RDQ Economics.

The number of continuing claims rose a slight 5,000 to 3.756m in the week ending April 30, while claims for emergency insurance, made by people who have expended their traditional benefits, fell by 31,961 to 3.4m in the week ending April 23.

The largest falls in initial claims were seen in New Jersey, California and Massachusetts, while New York, Michigan and Wisconsin recorded the most gains.

In a separate report, the US commerce department said retail sales rose by 0.5 per cent to $389.4bn from March to April, the smallest gain in nine months following March’s revised 0.9 per cent rise. Sales came in slightly below the 0.6 per cent predicted by analysts but were 7.6 per cent above their level of April 2010 as consumers paid more for fuel and food.

Petrol station sales led gains, rising 2.7 per cent, although the increase was smaller than March’s 4.1 per cent surge. Sales also picked up 1.5 per cent at grocery stores.

Faced with the surging costs of those staples, consumers pulled back spending on other items. Excluding petrol, sales rose 0.2 per cent, compared with a 0.5 per cent rise in March. Purchases of furniture, electronics and appliances, and sports equipment fell over the month, while auto sales rose to 0.2 per cent after falling 0.7 per cent in March when discounts were wound back.

“What we’re seeing is the beginning of the bite of higher food and energy prices on consumer discretionary spending,” said Steve Blitz, senior economist for ITG Investment Research.

Another US labour department report on Thursday showed surging oil also lifted producer prices in April.

Prices paid by companies for finished goods rose 0.8 per cent last month, faster than the 0.6 per cent economists had forecast and ahead of March’s 0.7 per cent gain. The increase left prices 6.8 per cent above their level of April 2010, the biggest yearly rise since September 2008.

A 2.5 per cent gain in energy prices contributed about three-quarters of the overall rise, the labour department said, while food prices rose 0.3 per cent, led by spiking prices for eggs.

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