WASHINGTON (AFP) – New data released this week suggested the US economy remains deep in the doldrums, frustrating Washington's efforts to kick-start industry and create jobs two years after the last recession ended.
Higher oil prices and rising costs for food appear to have retarded what was expected to be growing momentum in the country's private sector that would pick up the slack while federal and local governments slash spending.
Economists surprised by the data have cut forecasts for economic growth in the second quarter following the dismal 1.8 percent pace in the first, with indicators of industrial production, consumer spending and unemployment all appearing soft.
Consultancy Macroeconomic Advisers lowered its gross domestic product (GDP) growth forecast for the April-June period to 2.8 percent on Wednesday, from 3.5 percent just two weeks earlier, after seeing a sharp decline in orders for manufactured durable goods in April -- an indicator of how the industrial sector is doing.
The Commerce Department reported overall orders fell 3.6 percent from the previous month.
And excluding volatile orders for aircraft and other transportation equipment, orders were still down 1.5 percent -- showing US manufacturers are selling less.
Labor Department numbers released Thursday showed that weekly new claims for unemployment insurance -- a sign of the pace of layoffs -- remained over 400,000 for the seventh week in a row, after a drop below that level for several weeks in February and March appeared to signal an improving jobs market.
The Commerce Department meanwhile confirmed its earlier estimate that the economy only grew at a slow 1.8 percent annual rate in the first quarter, when economists had expected a higher figure.
Notable in the latest data was that consumer spending had been lower than originally understood -- a sign, analysts said, that high oil and food commodity prices were hitting shoppers' budgets for other things.
Ian Shepherdson, US economist for High Frequency Economics, said the sharp rise in the price of oil has helped stifle job creation.
"The trend in claims has nudged up a bit as companies have responded to the rise in oil prices," he said.
Commenting on the first-quarter GDP figure, Michael Gapen of Barclays Capital said the lower consumption suggested that "the surge in headline inflation from higher food and energy prices... cut into real spending more than originally estimated."
For two months the rise in the data on new jobless claims had been explained by statistical, seasonal or weather peculiarities.
But Thursday's number of 424,000 new claims -- up from 414,000 the previous week -- came with no such explanation, and the trend was hard to deny.
"The initial claims data have, on balance, deteriorated in the second quarter," said RDQ Economics in a report.
"We can no longer hide behind (Labor Department) claims that the rise in claims is related to end-of-the-quarter volatility."
The 9.0 percent jobless rate has bedeviled the White House, which has tried to keep government spending up, interest rates low, and the dollar competitive to stimulate business and industry in hopes they will start hiring.
Asked by a magazine for seniors what he would like for his 50th birthday on August 4, President Barack Obama replied: "A much lower unemployment rate. And lower gas prices. Those would be perfect gifts."
Economists said they still foresee a stronger second half, as consumers and businesses adjust to the higher oil price.
The second half "will be better as the oil hit fades," said Shepherdson.
"If the underlying economy is strengthening as credit accelerates, as we believe, then the oil interruption will not last much longer and (new jobless) claims will head south again during the summer."
But others girded for more unexpected turns in the data.
"The negative economic data surprises have significantly outnumbered the positive surprises," said Deutsche Bank Securities.
But the bank meanwhile kept its full-year forecast at 3.4 percent.
"The overarching theme remains that productivity is broadly slowing as the economic expansion continues, which means the pace of hiring should accelerate -- as is typical at this stage of an economic expansion."
