Jobless claims rise; growth in GDP is revised downward
WASHINGTON — New unemployment claims jumped unexpectedly last week, indicating a pickup in layoffs, a worrisome sign ahead of Friday’s jobs report for May.
Adding to the dreary economic news, the government said in a separate report Thursday that U.S. gross domestic product grew at a slower pace in the first quarter than previously thought.
Growth in GDP, the nation’s total output of goods and services, was revised to an annualized rate of 1.9% from the 2.2% pace estimated a month ago.
The size of the GDP revision by the Commerce Department disappointed analysts. It reflected a smaller increase in consumer spending and inventory building than originally estimated, and a bigger drag on growth from government spending cuts and the trade deficit.
On the positive side, business investments were revised slightly higher.
GDP expanded at an annual rate of 3% in the fourth quarter last year. Many analysts are expecting mediocre growth of about 2.5% this year, which doesn’t bode well for the job market.
The Labor Department’s report on weekly unemployment claims showed firsttime filings rose to 383,000 for the week that ended Saturday. That was an increase of 10,000 from the previous week’s revised figure, a sizable jump that followed smaller increases in the two previous weeks.
The rise in jobless claims was consistent with a report from Challenger, Gray & Christmas, a private outplacement firm, that showed an acceleration of layoff announcements last month by employers. Challenger said Thursday that businesses in May announced plans to cut 61,886 workers from their payrolls, up 53% from April and 67% higher than May 2011. The layoffs last month were reported largely by the computer industry.
Layoffs provide one side of the jobs equation; the other is hiring. And on that score, there are signs that May was not strong.
On Thursday, Automatic Data Processing Inc., a payroll processor, said its survey showed 133,000 private-sector jobs were added in May. That’s slightly below analysts’ expectations calling for job growth of about 150,000, which is more than enough to keep up with the growth rate of the labor force but much too slow to make up for the millions of jobs lost in the recession.
The pace of new job creation weakened in March and April to a monthly average of 134,000 after growing about 250,000 a month from December to February, when job gains were boosted by the warm winter weather.
Friday’s employment report is widely anticipated because it will shed light on how much unseasonably warm weather inflated the winter employment numbers as well as the underlying pace of job growth.