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US jobless number keep climbing

20 February 2009 07:18 (UTC +04:00)

Bakuâ€“ APA-Economics. The United States broke a five-month streak of falling wholesale prices but jobless numbers remained at elevated levels in the world’s largest economy mired in deep recession, government data showed Thursday,. AFP reports.

A rebound in energy prices helped pull the producer price index, which captures prices at the wholesale level, up 0.8 percent in January, the first increase in six months, the Labor Department said.

A rise in the closely watched index was expected by most analysts but the seasonally adjusted headline number far exceeded forecasts of 0.3 percent.

Yet economists said the trend for prices in the months ahead remained clearly oriented downward as the economy struggles to eject itself from a recession that began more than a year ago.

"One month does not make a trend, however, and there is little reason to think this will continue," said Aaron Smith of Moody’s Economy.com.

On an annual basis, wholesale prices fell 1.0 percent from January 2008, after declining 0.9 percent in December from a year earlier.

Economists were mixed on whether the January figures meant there was no immediate deflationary threat to the economy.

The index rise showed inflation slowing less quickly, which should give the Federal Reserve more confidence that deflationary psychology was not taking hold, Smith said.

But IHS Global Insight’s Brian Bethune said that considering the "exceptional weakness" in demand and output across the major industrialized nations as well as Eastern Europe and Russia, "the bottom line is that deflation has become more of an issue than inflation."

In addition, the first two US regional manufacturing surveys for February point toward a sharp contraction in production, investment and employment, said Ryan Sweet of Moody’s Economy.com.

"The surveys also heighten concerns the economy is headed for a deflationary trap," he said.

Consumer spending is a key component of the US economy. Deflation occurs when prices decline on a sustained basis, prompting consumers to delay purchases because they expect prices to fall further.

Amid the price concerns, the number of unemployed American workers continued to mount.

Continuing claims for unemployment benefits rose by 170,000 to 4.987 million for the week ending February 7, another all-time high, the Labor Department said. The rapid pace of layoffs was evident in initial jobless claims.

Although initial claims for government unemployment benefits were unchanged at 627,000 for the week ending February 14, the much watched four-week moving average has now increased in each of the last four weeks, experts said.

"Continuing claims are at a record high. They underscore the difficulty in finding a new job at this juncture and make it apparent for many people why they should be saving more money if possible," said Patrick O’Hare of Briefing.com.

"The increased propensity to save bodes well for consumer balance sheets, but it will be a drain on GDP since increased savings means less spending by the consumer," he said.

Meanwhile, a key corporate index of leading economic indicators rose a surprising 0.4 percent in January, the second consecutive monthly gain, giving a ray of hope that an economic rebound could occur.

The Conference Board’s index, a gauge of economic conditions over a six-month horizon, showed a larger than expected rise from the 0.2 percent gain in December.

But economist Ian Shepherdson of High Frequency Economics pointed out that the November and December indexes were revised down so the level of the January index was in line with his forecast.

"In short, we see no real improvement here despite the rise in the headline," he said.