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Latest reports show economic recovery is stumbling

WASHINGTON — The economic rebound is stalling.

A raft of weak new reports Thursday provided the strongest evidence yet that the recovery is slowing and added to concerns that the nation could be on its way back into recession.

Most notable was a rise in the number of people filing for unemployment benefits for the first time. New claims for unemployment jumped by 13,000 last week to a seasonally adjusted 472,000. The four-week average, which smooths fluctuations, rose to its highest level since March. Claims generally need to drop below 400,000 to signal that hiring is ramping up.

The bleak indicators come just after Congress adjourned for the holiday weekend without extending jobless benefits, and a day ahead of a report expected to show only modest improvement in the national job market.

On top of that, the housing market appears to be slumping again. Add in slower growth in China and the Europe debt crisis, and economists are scaling back their forecasts for the United States.

"When you add it all up, it doesn't imply a double-dip, but it does suggest that growth will be slower than we'd like to see," said Scott Brown, chief economist at Raymond James.

A double-dip recession happens when an economy shrinks, then begins to expand again before going back into reverse.

Senate Republicans, expressing concerns about the ballooning federal deficit, this week blocked a bill that would have kept unemployment checks going to people who have been laid off for long stretches.

More than 1.3 million people have been left without federal jobless benefits after Congress adjourned without an extension. That number could grow to 3.3 million by the end of the month if lawmakers can't resolve the impasse when they return.

States typically provide six months of unemployment help. During the recession, Congress added nearly a year and a half of extra benefits. Democrats want those terms extended through November, at a cost of $34 billion.

Today, the government's June jobs report is expected to show a modest rebound in private hiring — 112,000 jobs, according to a survey of economists by Thomson Reuters. Unemployment is expected to edge up from 9.7 percent to 9.8 percent.

Adding 112,000 jobs would be an improvement from May, when businesses added only 41,000. But the economy needs to generate at least 100,000 new jobs a month just to keep up with population growth, and probably twice that number to bring down the jobless rate.

The rebound so far has been fueled mostly by government stimulus spending, manufacturing activity and business spending on new equipment and inventories, and those factors are fading.

It's happening as new threats emerge: Stock markets are falling and home prices could drop again, lowering household wealth. Americans could respond by cutting back on spending and weakening the recovery.

Manufacturers reported Thursday that export orders grew at a slower pace in June than the previous month. New surveys suggested growth in China is slowing, which could lead it to import fewer American products.

There was also another fresh sign of trouble in the housing market. The number of buyers who signed contracts to purchase homes tumbled 30 percent in May, the National Association of Realtors said. Construction spending also declined for the month. Both were affected by the expiration of government incentives to buy homes.

Separately, the Institute for Supply Management, an industry trade group, said its manufacturing index slipped in June. But it is still at a level that suggests growth in the industrial sector, which has helped drive the economic recovery.

Latest reports show economic recovery is stumbling 07/01/10 [Last modified: Friday, July 2, 2010 7:02am]
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