weather unavailableweather unavailable
Make us your home page

Oil prices fall amid mixed economic signals

Crude oil futures plunged nearly 9 percent to settle below $100 per barrel as investors who had ridden a monthslong rally fled the market Thursday because of concerns about weakening demand for fuel in the United States.

The decline of $9.44 per barrel, or 8.6 percent, brings the week's loss for oil to $14.13, or 12.4 percent. Other commodities like silver and cotton have plunged, as well.

Oil rose 35 percent from mid February through the end of April. As it climbed above $100, economists warned that high fuel prices were taking a toll on the U.S. economy. Gasoline demand starting falling in March as motorists paid more at the pump; that trend was reinforced by industry and government studies released this week.

"More and more people were saying that oil was just too high," said Michael Lynch, president of Strategic Energy & Economic Research. "That got a lot of investors ready to run for the door. That's what they're doing now."

Also Thursday, the Labor Department said that applications for unemployment benefits rose by 43,000 to a seasonally adjusted 474,000 last week, the highest level in eight months and a troubling sign ahead of the government's report on April employment, which will be released today.

It was the third increase in jobless claims in four weeks. Applications have jumped 89,000, or 23 percent, in the past month. The four-week average, a less volatile measure, rose for the fourth straight week to 431,250.

"The trend is clearly upward, so that's disconcerting," said Kurt Karl, chief U.S. economist for Swiss Re. "When you get three or four weeks in a row of special factors, they're no longer so special."

Meanwhile, productivity rose at an annual rate of 1.6 percent in the January-March period, compared with a 2.9 percent increase in the previous quarter, the Labor Department reported Thursday. The gain in productivity was much slower than in the previous three months.

Labor costs rose at a 1 percent annual rate in the January-March period after falling 1 percent in the previous three months.

A slowdown in productivity growth is bad for the economy if it persists for a long period. But it can be good in the short term when unemployment is high because it signals companies must hire more workers in order to make further gains.

Analysts expect productivity will slow to about 2 percent growth for the year. They say companies are reaching the limits on how much they can get from their existing work forces and will have to begin hiring more workers in order to boost output further. They also forecast that labor costs will begin rising modestly after two years of declines.

Companies found ways to produce more goods and services with fewer workers during the recession. Greater productivity helped them boost profits. But it also allowed them to hold back on hiring after companies slashed millions of jobs during the downturn.

Oil prices fall amid mixed economic signals 05/05/11 [Last modified: Thursday, May 5, 2011 7:43pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times


Join the discussion: Click to view comments, add yours