Christopher S. Rugaber
AP Economics Writer
Washington — The U.S. trade deficit in July hit the highest level in six months as a record rise in imports outpaced a third straight increase in foreign demand for American products, according to government data released Thursday. Both gains provided more evidence that the worst recession since the 1930s was losing its grip on the global economy.
A rebound in the American labor market has yet to take hold, but first-time claims for jobless benefits did fall more than expected last week.
Companies are laying off fewer workers as the U.S. economy shows consistent signs that the recession is over. The Federal Reserve said Wednesday that 11 of its 12 regional banks reported the economy is stabilizing, an improvement from previous reports.
The Commerce Department said Thursday that the trade deficit rose 16.3 percent to $32 billion in July, much larger than the $27.4 billion imbalance that economists had expected. It was the largest imbalance since January and the percentage increase was the biggest in more than a decade.
“While wider trade deficits are normally not good news, in this case, the rise in demand for foreign consumer and business goods tells us the U.S. economy is healing,” Joel Naroff, president of Naroff Economic Advisors, wrote in a note to clients. “This was a positive report in that it provides further evidence that both the U.S. and foreign economies are coming back.”
On the jobs front, the Labor Department said Thursday that initial claims for unemployment insurance fell to a seasonally adjusted 550,000 from an upwardly revised 576,000 in the previous week. Analysts expected claims to drop to 560,000, according to Thomson Reuters.
The number of people continuing to receive benefits fell by 159,000 to nearly 6.1 million, the lowest level since early April.
Still, unemployment claims remain significantly above levels associated with a healthy economy and indicate that jobs remain scarce. Weekly initial claims are generally at 325,000 or below in a growing economy. A year ago, only 3.5 million people were receiving unemployment aid.
“The labor market’s healing process is agonizingly slow,” Joshua Shapiro, chief economist at MFR Inc., wrote in a note to clients.
A Labor Department analyst said that the jobless figures for seven states, including California and Virginia, were estimated because state governments were unable to provide data due to the holiday-shortened week.
Such estimates haven’t previously resulted in large revisions, the analyst said.
Economists closely watch initial claims, which are considered a gauge of layoffs and an indication of companies’ willingness to hire new workers.
While the figures are volatile, first-time claims have trended downward in recent months. Initial claims topped 600,000 for most of this year, until falling below that level in early July.
The four-week average of claims, which smoothes out fluctuations, fell by 2,750 to 570,000 last week.
That’s almost 90,000 below the peak for the current recession, reached in early April.
When federal emergency programs are included, the total number of jobless benefit recipients was 9.16 million people in the week that ended Aug. 22, up from 9.14 million in the previous week. Congress has added up to 53 extra weeks of benefits on top of the 26 typically provided by the states.
The large number of people remaining on the rolls is an indication that while layoffs may have slowed, companies are still reluctant to hire new employees.
Job losses have slowed recently. The Labor Department said last week that companies cut 216,000 jobs in August, a large amount but the smallest in a year. The unemployment rate, however, jumped to 9.7 percent from 9.4 percent in July.
The Fed and many private economists predict the jobless rate will hit 10 percent by the end of this year. The recession so far has eliminated a net total of 6.9 million jobs.
More job cuts were announced this week. MEMC Electronic Materials Inc., a maker of semiconductor materials based in St. Peters, Mo., said it plans to shut two plants starting next year, eliminating about 540 jobs. Valero Energy Corp. said it will close part of an oil refinery and lay off 150 employees and 100 contract workers.
Among the states, New York had the largest increase in claims of 4,546, which it attributed to greater layoffs in the transportation and service industries. The next largest increases were in Texas, Florida, New Jersey and Georgia. The state data lag initial claims by a week.
Michigan had the largest drop in claims of 1,915. The next largest decreases were in Ohio, Oregon, Wisconsin and Pennsylvania.
AP Economics Writer Martin Crutsinger contributed to this report.