WASHINGTON—The number of U.S. workers filing claims for initial jobless benefits fell last week and retail sales rebounded last month from a dismal March, suggesting the economy, while soft, was not crumbling rapidly.
Many economists have concluded the U.S. economy is in recession. However, a string of recent data, including reports on Thursday, has strengthened the hand of analysts who argue the United States economy may be able to avoid contraction.
Initial claims for state unemployment benefits fell to 365,000 last week from 383,000 in the prior week, the Labor Department said. The level was slightly lower than Wall Street had expected.
The number of people still on the benefit rolls after drawing an initial week of aid fell 10,000 to 3.02 million in the week ended April 26, the latest period for which figures were available. Continued claims remained above 3 million for the second straight week, a level not seen since April 2004.
"The (labor market) picture is not very good but it doesn't seem to be getting dramatically worse," said David Sloan, an economist for 4CAST LTD in New York.
Separately, 68 percent of U.S. retailers reported better-than-expected sales at stores open at least a year, partly reflecting strong results at discount chains as consumers tried to hold down food expenses.
The International Council of Shopping Centers reported April U.S. chain store sales rose 3.6 percent from a year ago on a same-store basis, partly because Easter was in March. The holiday, which usually falls in April, takes away one shopping day and reduces total sales for the month.
"In addition, there was some modest pent-up demand with more seasonable weather early in the month, along with some increased promotional activity, which helped to explain the strongest monthly performance in more than a year," said Michael Niemira, ICSC's chief economist.
The sharply rising cost of food and fuel has hit U.S. consumers hard. In the first quarter, consumer spending advanced at the slowest pace since 2001, leading to a pileup of inventories on business shelves.
While the economy managed to expand at a 0.6 percent annual rate in the first quarter, it would have contracted without the change in inventories.
A Commerce Department report on Thursday showed wholesale inventories unexpectedly fell 0.1 percent in March, the first drop since December 2006, as sales jumped 1.6 percent.
The strong wholesale sales pace pushed the inventory-to-sales ratio, a measure of how long it would take to eliminate stocks at the current sales pace, down to 1.09 months worth, matching a record low set in November 2007.
The lean level of stocks in relation to sales offered a hint that the buildup in inventories in the first quarter was not overdone, suggesting little need to cut back on production in the months ahead to work stocks down.
Labor Market Strains
A deep housing downturn and related tightening of credit have weighed heavily on the economy, which has shed jobs in each of the last four months.
While the latest jobless claims figure suggested the pace at which the labor market was weakening had not gathered steam, it also suggested the market had yet to improve much either.
The four-week moving average of new claims, considered a more reliable gauge of labor trends because it irons out weekly volatility, rose to 367,000 last week from 364,500 in the prior week.
Jobless claims remain "remarkably subdued despite a sense that the U.S. is in recession, although continued claims are trending higher suggesting the labor market is softening," said Sal Guatieri, senior economist for BMO Capital Markets in Toronto.
The weak economy and rising prices drove consumers to hunt for bargains in April.
Discounter Wal-Mart, the world's largest retailer, said sales at stores open at least a year rose 3.2 percent last month, excluding fuel sales. Costco, the nation's largest warehouse club operator posted an 8 percent gain.
"We are, of course, benefiting from some inflation on the food side as a result of the recent run up in the cost of commodities and the continued run up in the price of oil and gasoline," Costco said.
Warm weather also helped give a boost to retail sales, as many apparel stores reported strong results.
"Company commentary suggests that April's improved results should not be interpreted as evidence of broader improvement in the consumer environment," said Uta Werner, a retail analyst at Sanford Bernstein Research.
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