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Unemployment report for April will be key to gauging status of economic recovery

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With the U.S. economic recovery starting to show cracks, Friday’s monthly unemployment report will be a key test of whether the slowed growth is causing companies to pull back on hiring — a sign that it could be time to hit the panic button.

The number of Americans filing new claims for unemployment insurance benefits spiked to 474,000 last week, the Labor Department said Thursday, the highest total since August and up from 431,000 the previous week. The Labor Department has attributed the rise to temporary factors, such as layoffs in New York state tied to spring break, a new benefit program in Oregon, and temporary shutdowns at auto plants.

Still, the increase in the number of new claims in the past few weeks has interrupted a steady downward trend since the start of the year. And it coincides with a survey released Wednesday that showed lower-than-expected expansion in the service sector last month.

Economists have said that these signs of weakness reflect fluky, one-time events rather than an underlying trend. But the economy keeps getting hit by negative surprises, and there’s been little positive news to bring some relief.

The April unemployment numbers, to be released at 8:30 a.m., should be a more reliable accounting of whether the nation has something to worry about.

Analysts expect relatively benign numbers. Forecasters surveyed by Bloomberg predict that the nation added 185,000 jobs in April — lower than the 216,000 added in March — and that unemployment remained at 8.8 percent, leveling off after four months of decline.

While those numbers would reflect lagging growth, the effect would not be serious enough to stoke fears that the economy is losing momentum.

The job market has been a bright spot on the economic landscape so far in 2011, with solid reports on job creation and unemployment in February and March. (The January numbers were distorted by weather and therefore hard to interpret.)

That steady job creation has come despite a tepid economic expansion. Gross domestic product grew at a 1.8 percent annual rate in the first three months of the year, but economists generally expect the pace to speed up in the second quarter.

But if the rate of growth does not pick up, it would bode ill for the millions of Americans who are still looking for jobs. And if Friday’s report is shaky — less than 150,000 jobs added, along with an uptick in the unemployment rate — that could mean the expansion that began in July 2009 is running out of gas again, as it did in summer 2010.

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