The number of Americans claiming new unemployment benefits was steady last week and heavy discounting lifted sales at retailers in July, hopeful signs for the sputtering economy. Initial claims for state jobless benefits nudged down 1,000 to 400,000, the Labour Department said on Thursday.
Economists had expected claims to rise to 405,000 and the dip last week indicated an easing in layoffs, which have weighed on employment in the past two months. "While the economic slowdown appears to be stretching into the third quarter, what really matters is jobs," said Millan Mulraine, a macro strategist at TD Securities in New York. There was also more encouraging news for the economy, whose growth pace stalled in the first half of this year. Many retailers, including Limited Brands and teen apparel chains Hot Topic Inc and Wet Seal, reported healthy monthly sales increases in July as deep discounts and unusually warm weather lured shoppers to malls.
Analysts are expecting same-store sales to rise 4.3 percent in July, compared with a year-ago increase of 2.8 percent, according to Thomson Reuters data. Gross domestic product grew at an annual pace of 1.3 percent in the second quarter after a negligible 0.4 percent rate in the January-March period. Data so far show the anaemic growth pace persisted early in the third quarter, with manufacturing activity hitting a two-year low in July and the services sector expanding at its slowest pace in nearly 1-1/2 years.
"We expect economic activity to improve in the second half of the year, which should result in better labour market conditions," said Michael Gapen, a senior economist at Barclays Capital in New York. The slowdown is not only confined to the United States. The claims data came before Friday's release of the government's comprehensive employment report for July, which will be scrutinised for signs of how quickly the economy can regain its momentum.
Nonfarm payrolls likely increased 85,000 last month, according to a Reuters survey, after rising only 18,000 in June. The jobless rate is expected to hold steady at 9.2 percent. "The economy remains in a questionable phase and employers are well aware of it," said Jim Baird, a partner at Plante Moran Financial Advisors in Kalamazoo, Michigan. Jobless claims are hovering around 400,000 and need to decisively break beneath that level to signal a sustainable improvement in the labour market. The four-week moving average of claims, considered a better measure of labour market trends, fell to its lowest level since mid-April.
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