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Published: Friday, 10/1/2010

Unemployment benefits boost economy, but growth remains sluggish

ASSOCIATED PRESS

WASHINGTON - A flurry of data Friday showed the economy is improving - with temporary help from the government.

Consumer spending rose in August and incomes increased by the largest amount in eight months, the Commerce Department said. Still, the income gain was propelled mostly by the government's short-term extension of unemployment aid, not wage gains.

A big jump in government projects lifted construction spending in August, Commerce said. That offset the weakest level in private construction spending in 12 years.

Separately, a private trade group said manufacturing activity expanded in September for the 14th-straight month.

Confidence among U.S. consumers declined less than forecast, evidence the largest part of the economy may be stabilizing.

The Thomson Reuters-University of Michigan final index of consumer sentiment fell to 68.2 from 68.9 in August. The gauge compares with a preliminary reading of 66.6 issued last month.

The reports all point to an economy that is growing, but at a sluggish rate and not fast enough to drive down the 9.6 percent unemployment rate.

Consumer spending rose 0.4 percent in August, matching the July growth rate. Spending isn't likely to see a big gain until income growth accelerates.

The 0.5 percent rise in August incomes would have been just 0.2 percent without the extended unemployment benefits. The program had temporarily lapsed in July after Republicans blocked an extension. That reduced the total for incomes by about $17 billion at an annual rate.



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