GDP growth down, unemployment claims up

By Don Lee

May 31, 2012 12 AM PT

WASHINGTON -- New unemployment claims unexpectedly jumped last week, indicating a pickup in layoffs, a worrisome sign ahead of Friday’s important jobs report for May.

Adding to the dreary economic news, the government said in a separate report Thursday that U.S. gross domestic product grew at a slower pace in the first quarter than previously thought. Growth in GDP, the total value of goods and services produced in the nation, was revised down to an annualized rate of 1.9% from 2.2% initially estimated a month ago.

The revision by the Commerce Department reflected a smaller increase in consumer spending and inventory building, and a bigger drag on growth from government cuts and the trade deficit. On the positive side, business investments were revised slightly higher.

GDP expanded at an annual rate of 3% in the fourth quarter of last year. Many analysts are expecting GDP growth to remain mediocre this year at about 2.5%, which doesn’t bode well for the job market.

The Labor Department’s report Thursday on weekly unemployment claims showed first-time filings rose to 383,000 for the week ending Saturday. That was an increase of 10,000 from the previous week’s revised figure, a sizable jump after smaller increases in the previous two weeks.

The rise in jobless claims was consistent with a report from Challenger, Gray & Christmas, a private outplacement firm, that showed an acceleration of layoff announcements this month by employers. Challenger said Thursday that businesses in May announced plans to cut 61,886 workers from their payrolls, up 53% seasonally unadjusted from April and 67% higher than May 2011. The May layoffs were reported largely by the computer industry.

Layoffs provide one side of the jobs equation; the other is hiring. And on that score, May is not looking strong.

On Thursday, Automatic Data Processing Inc., a payroll processor, said its survey showed 133,000 jobs were added in May. That’s slightly below analysts’ expectations calling for job growth of about 150,000, which is more than enough to keep up with the rate of labor force population growth but much too slow given that the economy remains millions of jobs in the hole from the recession.

The pace of new job creation weakened in March and April, to a monthly average of 134,000, after growing about 250,000 a month from December to February, when job gains were boosted by the warm winter weather.

Friday’s report is widely anticipated as it will help economists get a better idea of how much weather inflated the strong winter job numbers and what the underlying job growth may be.

Consumer confidence dipped in May, Conference Board says

GDP: U.S. economy expands at lackluster 2.2% rate in 1st quarter