More Americans applied for unemployment benefits
WASHINGTON (AP) — More Americans applied for unemployment benefits last week, adding to evidence that the job market is weakening.
The Labor Department says applications rose by 9,000 to a seasonally adjusted 429,000 last week. It was the second increase in three weeks and the biggest jump in a month. Applications have been above 400,000 for 11 straight weeks.
Applications dipped below 400,000 in February and stayed below that threshold for seven of the following nine weeks. Applications fell as low as 375,000, a level that signals sustainable job growth. But applications surged in April to an eight-month high of 478,000 and have shown only modest improvement since that time.
Companies pulled back on hiring in the spring in the face of higher gas and food prices. That has cut into consumer spending on other discretionary items, such as furniture and appliances, which boost economic growth.
Employers added only 54,000 net new jobs in May, much slower than the average gain of 220,000 per month in the previous three months. The unemployment rate rose to 9.1 percent from 9 percent in April.
The economy needs to generate at least 125,000 jobs per month just to keep up with population growth. And at least twice that many jobs are needed to bring down the unemployment rate.
The Federal Reserve acknowledged on Wednesday that the economy has slowed in recent months. Fed officials also said in a statement summing up their two-day meeting that "recent labor market indicators have been weaker than anticipated."
As a result, the Fed reduced its forecast for employment and growth this year. It projects that unemployment at the end of 2011 will be around 8.6 percent to 8.9 percent. That's more pessimistic than its forecast from two months ago, which had put the unemployment rate at 8.4 percent to 8.7 percent by year's end.
That pessimism is also seen in projections by private economists. According to an Associated Press Economy survey last week, the nation will add only about 1.9 million jobs this year and the unemployment rate will fall to only 8.7 percent at the end of the year.
The Fed on Wednesday left a key interest rate unchanged at near zero percent and repeated a pledge to keep rates exceptionally low for "an extended period."
Fed officials said in a statement that they think the main causes of the economy's slowdown, such as high gas prices and supply disruptions from Japan's disasters, are temporary. Once those problems subside, Fed officials said the economy should rebound.
But at a news conference after the statement was released, Federal Reserve Chairman Ben Bernanke acknowledged that some of the problems slowing the economy could persist into next year. He cited continued weakness in the financial sector and persistent problems in the housing market.