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Published: Friday, 7/22/2011

Slumping economy spills into summer

Latest data provide little encouragement

ASSOCIATED PRESS
Hiring has stalled, and applications for unemployment benefits have topped 400,000 for 15 straight weeks. Hiring has stalled, and applications for unemployment benefits have topped 400,000 for 15 straight weeks.
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WASHINGTON -- The economy's spring slump appears to be extending into the summer, according to a slew of data released Thursday.

Layoffs are rising. Manufacturing activity in the Northeast expanded only slightly in July after contracting in June. Economic growth is projected to pick up this fall, but not enough to give businesses confidence to hire and speed the recovery.

Economists are not optimistic. They are forecasting a third straight month of feeble hiring in July, based on the latest round of data. Expectations are the economy added somewhere in the range of 50,000 to 100,000 net new jobs this month.

That's not enough to keep up with population growth and far below what is needed to lower the unemployment rate, which was 9.2 percent last month.

"We're going to see improvement, but right now nothing's improved yet," said Joshua Dennerlein, an economist at Bank of America Merrill Lynch.

Applications for unemployment benefits rose last week to a seasonally adjusted 418,000, the Labor Department said. They have now topped 400,000 for 15 straight weeks. Applications had fallen in February to 375,000, a level that signals healthy job growth.

The Philadelphia Federal Reserve Bank said its manufacturing index rose to 3.2 in July, a sign that the sector is growing again. It had contracted in June for the first time in nine months when the index dropped to negative 7.7, the lowest level in two years. Any figure below zero indicates contraction.

The index had topped 40 in March. The lower reading illustrates the impact of a parts shortage caused by the Japanese earthquake and tsunami, which has affected many U.S. automakers and electronics producers. Still, manufacturers expressed some hope in the latest survey, saying they expect orders and shipments to pick up significantly six months from now.

The Conference Board also projected modest growth for the broader economy in the coming months based on its latest reading of its economic indicators. The index rose in June for the second straight month. It had declined in April, the first time that happened in nearly a year.

The private research group offered a caveat: U.S. lawmakers must agree to raise the government's borrowing limit and avoid a catastrophic default on the debt.

The economy expanded only 1.9 percent in the January-March quarter. Analysts forecast even weaker growth for the April-June period. The government gives its first reading for second-quarter growth next Friday.

Federal Reserve Chairman Ben Bernanke and other economists attribute the slumping economy to temporary factors. High gas prices caused consumers to pull back on spending. Supply disruptions caused by the Japan crisis have slowed manufacturing production, which until this spring was among the strongest performers since the recession ended two years ago.



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