U.S. Growth Rate Lowered, Weekly Jobless Claims Rise

Devan Biswas
31 May, 2012
New York City

U.S. stocks traded sideways after the latest reports on jobs market indicated slow and uneven recovery. The first quarter GDP growth was revised lower to 1.9% and corporate profits in the period rose at the slowest pace in thirteen quarters.

[R]9:45 AM New York – U.S. stocks traded sideways after the latest reports on jobs market indicated slow and uneven recovery. The first quarter GDP growth was revised lower to 1.9% and corporate profits in the period rose at the slowest pace in thirteen quarters.[/R]

Wall Street turned cautious after the latest data on job market showed more stress and slow and uneven progress and the March quarter economic growth was revised lower and corporate profit rose at the slowest pace since the final quarter in 2008.

Weekly Jobless Claims Rise

The Labor Department said initial claims for the state unemployment benefits increased 10,000 to a seasonally adjusted 383,000 in the last week. Prior week’s data was revised up to 373,000 from the initial estimate of 370,000.

Jobless claims rose for the fourth week in a row and have increased in seven of the last eight weeks but the increases have been marginal. The four-week moving average of initial claims increased 3,750 to 374,500.

Private Sector Adds 133,000 Jobs

Private employers added 133,000 jobs in May and the net new jobs addition was revised lower to 113,000 in April according to the latest survey conducted by ADP Employer Services.

Employment in construction declined 1,000 and factories lost 2,000 jobs and service sector added 132,000 jobs according to the survey. Small companies with less than 50 workers added 67,000 jobs.

The Labor Department is scheduled to release its monthly survey of labor markets and unemployment report.

U.S. Growth Lowered

The Commerce Department lowered economic growth in the first three months to March to 1.9% from the previous estimate of 2.2% reported in April.

The growth estimate was lowered after local and state government spending rate decline was lowered to 2.5% from the earlier estimate of 1.2% fall. Inventories were added at $57.7 billion annual rate compared to $52.2 billion rate in the final quarter of 2011.

The report also stated that corporate earnings rose at 0.6% in the first quarter after rising at 6.5% in the final quarter of 2011. The first quarter corporate profit increase was the smallest since the fourth quarter in 2008.

Sovereign Markets Flight to Safety

The stress in financial markets around the world was visible as global markets completed the worst monthly decline in three years. Euro zone stress is increasingly dragging economies of China and India into a slower growth mode and driving the commodities prices lower.

Today India reported GDP growth in the quarter to March fell to 5.3%, the eighth quarterly growth decline in a row and for the fiscal year the economic growth dropped to 6.5%.

The stress in bond markets was palpable after Switzerland sold bonds at a negative interest rate of 0.62% on Tuesday and the U.S. Treasury yields dropped near record low on Wednesday. German and Japanese bond yields also declined to near lows as investors sought the safety of principal.

The Japanese government 10-year bond yield fell to a 9-year low of 0.81%.

The currency markets are also roiled as the euro traded near a 2-year low against the dollar and the yen and the dollar strengthened after a European Union report painted a weak economic outlook for the region including Germany.