WASHINGTON - THE number of people receiving unemployment benefits has set another record, a development likely to weigh on consumer spending and slow the economy's recovery.
While retail sales rose in May, the increase resulted largely from a spike in gasoline prices and higher auto sales, according to a report from the Commerce Department. Overall, the retail report Thursday showed consumers remain reluctant to spend, economists said.
Slow recovery expected
The Fed said on Thursday that American households lost US$1.33 trillion (S$1.92 trillion), or 2.6 per cent, of their wealth in the first three months of the year. That caused household net worth to drop to the lowest level since the third quarter of 2004.
Retail sales did rise 0.5 per cent in May, the government said, the first increase in three months. But excluding autos, gas and other volatile categories, so-called 'core' retail sales were flat compared with April.
The number of people continuing to claim benefits exceeded 6.8 million in the week ending May 30, the Labour Department said Thursday. That was the 19th straight weekly record, after a drop last week was revised to an increase.
And that doesn't include about 2.4 million people receiving benefits through federal and state extended programs, which can add up to 53 weeks to the 26 weeks provided by most states. That means about 8.5 million people received unemployment insurance in the week ending May 23, the latest data available, triple the total of a year ago.
The unemployment rate jumped to 9.4 percent in May, a 25-year high, as employers cut 345,000 jobs. Some economists project the rate could near 11 percent by the middle of next year.
More encouraging was a drop in initial jobless claims to a seasonally-adjusted 601,000 last week, which was below analysts' expectations and the lowest level since January.
New jobless claims are a measure of the pace of layoffs and are seen as a timely, if volatile, indicator of the economy's health.
The huge increase in the unemployment benefit rolls is a sign that even as layoffs slow, companies remain reluctant to hire.
The weak job market, along with dwindling home values and falling stock portfolios, likely will restrain consumer spending for months, economists said.
That's a big reason why many analysts and the Federal Reserve expect any economic recovery later this year to be slow. -- AP
