gdp below estimates jobless rate surges

The government says economic growth picked up in the second quarter as tax rebates energized consumers somewhat, but applications for jobless benefits spiked, indicating continued problems with the economy.



The Commerce Department reported Thursday that gross domestic product, or GDP, increased at an annual rate of 1.9 percent in the April-to-June period. That marked an improvement over the feeble 0.9 percent growth logged in the first quarter and an outright contraction in the economy during the final quarter of last year.

The GDP rebound followed a treacherous patch where the economy actually jolted into reverse at the end of 2007.


Still, the second-quarter rebound wasn't as robust as economists had hoped; they were forecasting growth to clock in at a 2.4 percent pace. The rebound, while welcome, isn't likely to be seen as a signal that the fragile economy is out of the woods. There are fears that as the bracing tonic of the tax rebates fades, the economy could be in for another rough patch later this year.

The jobs picture continues to be a concern, as data released Thursday showed the number of people filing claims for unemployment benefits jumped to the highest level in five years last week, reflecting in large part a new government outreach effort to locate people eligible for benefits.

The Labor Department reported Thursday that the number of applications for jobless benefits soared to 448,000, an increase of 44,000 from the previous week. That was far worse than the decline of 8,000 that economists had been expecting.


However, the government attributed much of the big jump to a special outreach program to notify people that they could qualify for up to 13 weeks of additional benefits because of legislation Congress passed in June.


The overall total surpassed the previous high for the current slowdown of 406,000 in late March. It was the highest claims level since they totaled 450,000 the week of April 19, 2003, a period when the country was struggling through a jobless recovery following the 2001 recession.


The health of the economy is the top concern of the public -- and by extension politicians including candidates vying for the White House.

GDP actually contracted by 0.2 percent, on an annualized basis, in the last three months of 2007, according to annual revisions released by the government.

That contraction reflected the deepest cuttbacks in 26 years from builders clobbered by the housing slump and caution on the part of consumers spooked by all the fallout.


The fourth-quarter's dip marked the worst showing since the third quarter of 2001, when the economy was last in a recession. The government's old estimate for the final quarter of last year was in positive territory -- but not by much -- at an anemic 0.6 percent growth rate.


The government will report on the employment picture for July on Friday. Many economists believe that report will show the jobless rate edged up to 5.6 percent in July from 5.5 percent in June. Economists are looking for businesses to have cut jobs for a seventh straight month, and project that payroll employment will fall by 72,000 following a loss of 62,000 in June.

General Motors Corp. officials said this week that they plan to cut 15 percent of their U.S. and Canadian salaried work force -- or around 5,100 jobs -- as part of a program to slash billions of dollars in costs.

Also Starbucks Corp., which already planned to shut 600 of its stores, said it will cut almost 1,000 office jobs, which will include an expected 550 layoffs as it deals with falling sales.