More Mixed Signals Cloud Recovery Debate : Economy: GDP is revised upward, and corporate profits jump in the first quarter. But more file for jobless benefits, and home sales fall.
The U.S. economy grew at an annual rate of 2.7% in the first three months of the year, the briskest pace of the Bush presidency, the government said Thursday.
An accompanying report showed that after-tax profits of American corporations jumped 11.3% in the first three months of the year, the biggest increase in nearly five years.
But while the Administration insisted that the economy is clearly in a period of “modest growth,” private analysts dismissed the rise in the gross domestic product as ancient history and worried that more recent reports show that the recovery is in danger of stalling out again.
In another report, the Labor Department said the number of Americans filing first-time claims for unemployment benefits shot up to 422,000 for the week ending June 13. The unexpectedly sharp increase of 16,000 from the previous week put the number of newly laid-off workers seeking jobless benefits at its highest level in six weeks.
And in another sign of weakness, sales of existing homes dropped for a second straight month, falling 1.7% to a seasonally adjusted annual rate of 3.43 million units in May. The National Assn. of Realtors blamed rising mortgage rates for the setbacks.
In California, sales of existing detached homes dipped 0.4% during May, compared to April. Sales were also down from a year ago when sales peaked during the post-Gulf War home-buying rally, the California Assn. of Realtors reported.
Statewide, 459,330 homes closed escrow during May on a seasonally adjusted annualized basis, down from a revised annual rate of 460,970 in April.
Economists said the weakness in the housing sector and the labor market, coupled with a report Wednesday showing a big decline in orders for manufactured goods, all pointed to an economy that is slowing down rather than revving up.
They worried that this year’s recovery could be in danger of faltering, just as a similar rebound did in 1991.
“The data is telling us that the threat of a relapse into stagnation is rising,” said Laurence Meyer, head of an economic consulting firm in St. Louis.
“The first quarter was a good starter,” said Robert Dederick, chief economist at Northern Trust Co. of Chicago. “But the question is can we maintain it, and the answer right now is that we are going to have trouble.”
Michael J. Boskin, chairman of the President’s Council of Economic Advisers, told reporters that he was not overly concerned to see some economic indicators falling while others are rising.
“The economy is improving, but you can’t expect every indicator to be up,” he said. “Clearly, the economy is in a period of modest growth.”
The increase in the GDP, the country’s total output of goods and services, was revised up from a 2.4% estimate made a month ago.
Existing Home Sales
Seasonally adjusted annual rate, millions of units
May, ‘92: 3.43
April, ‘92: 3.49
May, ‘91: 3.48
Source: National Assn. of Realtors
GDP
The GDP measures all the goods and services produced by workers and capital located in the United States, regardless of ownership.
Percent change from previous quarter
1st quarter +2.7% (revised)
Source: Commerce Department
