Unemployment dips in sign of improved job market

By CHRISTOPHER S. RUGABER, AP Economics Writer

WASHINGTON (AP) - The number of people seeking unemployment benefits dipped last week, a sign the job market may be improving slowly.

The Labor Department says that applications for unemployment benefits edged down 1,000 to a seasonally adjusted 400,000. That's the lowest level in four months. The previous week's figure was revised upward from 398,000 to 401,000.

The four-week average, a less volatile figure, dropped for the fifth straight week to 407,750. That suggests there is a downward trend in applications.

Applications have been at or above 400,000 for 17 weeks. They fell in February to 375,000, a level that signals healthy job growth. They stayed below 400,000 for two months, but applications then surged to an eight-month high of 478,000 in April and have declined slowly since then.

The report comes a day before the government will release the July employment figures. Economists forecast that Friday's report will show that employers added a net total of 90,000 jobs. The unemployment rate is expected to remain unchanged at 9.2 percent.

That would be an improvement from June, when the economy added just 18,000 - the fewest in nine months. But at least three times that many new jobs would be needed to substantially reduce the unemployment rate.

Employers are pulling back as the economy struggles. The economy grew at an annual rate of only 1.3 percent in the April-June period after barely expanded in the first three months of this year. Growth was less than 1 percent in the first half of the year, the weakest stretch since the recession ended.

Manufacturers expanded at their slowest pace in two years in July, a private trade group said Monday. The Institute for Supply Management also said that expansion among retailers, restaurants, financial services and service industries slowed to a 17-month low in July.

The two reports showed that there is little sign the economy is growing any faster in the July-September quarter than in the first half of this year.

A more cautious consumer is a key reason for the sluggish period. Americans cut their spending for the first time in 20 months in June, the government said Tuesday. For the entire April-June period, consumer spending rose only 0.1 percent, the worst showing since the recession ended.

Much of the slowdown stems from a spike in gas prices since last year. That has limited what consumers can spend on discretionary goods, such as furniture, electronics, and appliances. Spending on those categories has fallen for three straight months.

Manufacturing output has also been hit by supply disruptions that resulted from Japan's March 11 earthquake. Those disruptions caused auto companies in the U.S. to reduce production.

Economists had predicted the economy would turn around in the second half of the year once those temporary factors began to fade.

But many are now more pessimistic about the second half of this year. Goldman Sachs recently cut its estimate for growth in the July-September period to 2.5 percent from 3.25 percent. JPMorgan, meanwhile, has reduced its estimate to 1.5 percent, from as high as 3 percent several weeks ago.

Growth of about 2.5 percent is barely enough to reduce the unemployment rate. The economy would need to grow 5 percent for a whole year to bring down the rate by one percentage point.

(Copyright 2011 by The Associated Press. All Rights Reserved.)