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Numbers show U.S. economic gains are losing steam

WASHINGTON — The U.S. economy is looking slightly weaker a day before a critical report on May job growth.

Economic growth was a little slower in the first three months of the year than first estimated, largely because governments and consumers spent less and businesses restocked their supplies more slowly.

The number of people who applied for unemployment benefits rose to a five-week high last week. And a survey of private companies showed only modest hiring gains last month.

Still, a softer job market hasn't caused Americans to scale back spending. Consumers spent more at retail stores in May than the same month last year, buying more clothes and Mother's Day gifts.

Thursday's data showed that:

• The U.S. economy grew at an annual rate of 1.9 percent in the first three months of the year, the Commerce Department said in its second of three estimates of January-March growth. That's lower than its initial estimate of 2.2 percent.

• Weekly applications for unemployment aid rose 10,000 to a seasonally adjusted 383,000, the Labor Department said.

• Private businesses added 133,000 jobs last month, according to a survey by payroll provider ADP. That figure disappointed most economists, who had hoped to see job growth accelerate after ADP's survey found that just 113,000 jobs were added in April.

When the government issues its report today on May employment, economists expect it to say that employers added 158,000 jobs. That would be better than in the past two months, but far below the winter's pace of 252,000 jobs per month. They also expect no change in the unemployment rate, which was 8.1 percent in April.

The government makes three estimates of quarterly economic growth, or gross domestic product. GDP measures the output of all goods and services in the United States.

A big reason growth slowed in the January-March quarter was that government spending at all levels fell at a 3.9 percent annual rate. That's the biggest decline in a year and nearly a full percentage point more than estimated last month.

Federal government spending fell at a 5.9 percent annual rate in the first quarter. Spending by state and local governments fell at a 2.5 percent annual rate in the first quarter, double the initial estimate. Many economists had thought the worst was over at the state and local level.

Joel Naroff, chief economist at Naroff Economic Advisors, said the economy would be growing at least a full percentage point faster if governments were spending at the rate they normally do three years into a recovery.

The unemployment rate has fallen a full percentage point since August — from 9.1 percent to 8.1 percent last month. Part of the reason for the drop is that employers added 1.5 million jobs in that time. But another reason the rate has fallen so fast is that some people have grown discouraged and given up looking for work.

During the January-March quarter, consumer spending grew at an annual rate of 2.7 percent. While that was the fastest pace since the end of 2010, it was down from the initial estimate of 2.9 percent.

Numbers show U.S. economic gains are losing steam 05/31/12 [Last modified: Thursday, May 31, 2012 9:32pm]
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