The shoppers still haven't dropped. American retailers yesterday reported stronger-than-expected sales in June, suggesting that the economy may have entered the second half of the year growing at the same rapid pace it displayed in the first half.

Separately, the Labor Department said the number of people filing for unemployment compensation fell last week for the second straight week. Although the claims numbers tend to fluctuate widely, the four-week average also fell. So far this year, the weekly numbers have been averaging 305,000, compared with 316,000 a week last year, one indication of a continued tight labor market.

And in another sign of a buoyant economy, oil prices rose above $20 a barrel yesterday for the second time in recent days on strong demand for gasoline from motorists.

"It does appear that the economy has not lost any momentum as we begin the second half of the year," said Lynn Reaser, economist at the Bank of America Private Bank in Jacksonville.

That could present a problem for the Federal Reserve's policymaking committee, which last week raised short-term interest rates a quarter of a percentage point to preempt a pickup of inflation. Traders said the markets remain worried that the economy's strength could raise inflationary pressures, prompting Fed policymakers to raise rates again at their meeting next month.

Both the bond and stock markets initially sold off on the news reports yesterday, before recovering somewhat.

"The Fed and the bond market don't feel completely comfortable" with the vigorous economy, said Credit Suisse First Boston economist Roseanne Cahn. "But inflation is not going to pick up."

Although the unemployment rate is a low 4.3 percent, there is as yet little evidence it is producing much upward pressure on wages as companies use technology and other productivity-enhancing factors to produce more goods with the same or fewer workers.

In this environment, workers are finding plentiful jobs at decent wages, helping them propel sales at the largest retailers. Wal-Mart Stores Inc., for example, reported that sales at stores open at least a year rose 6.5 percent in June from a year earlier. Dayton Hudson Corp., which operates the popular Target mid-priced discount chain, said same-store sales rose 6.9 percent. Gap Inc. said same-store sales increased 13 percent, while total sales were up 35 percent. Kohl's Corp., with same-store sales up 15 percent, was another standout.

Many retailers credited the warm early summer weather and the date of the Memorial Day holiday (it fell on May 31 and was included in June figures for some chains) for the strong sales. The hot, dry weather throughout much of the East and Midwest had shoppers snapping up shorts, sundresses, air conditioners and barbecue grills.

"Basically, all of the fundamentals are aligned: the stock market, the weather and the calendar," said Kenneth M. Gassman Jr., a retail analyst with Davenport & Co. in Richmond.

At the Bikini Shop on 18th and M streets NW yesterday, customers at lunch hour formed lines outside the seven dressing rooms.

"What do you expect?" said Colleen Corrigan Shaughnessy, the Bikini Shop's owner. "It's 100 degrees out. They just want to take their clothes off. On weekends, people walk out of our store with their bathing suits on and wrap skirts."

Another hot area for retailers was consumer electronics, traditionally items that are highly susceptible to the state of the economy because they are often impulse buys. The new DVD technology for video players helped propel Circuit City Stores Inc.'s same-store sales up 8 percent last month.

But not everyone had a sterling month. Sears, Roebuck and Co. and J.C. Penney Co. continued to post disappointing results. The two retailers have faced growing competition from discounters offering similar merchandise.

On the employment front, jobless claims fell by 6,000 last week to 294,000, the lowest weekly number since late March.

Last week, the government reported that job growth continues at a strong pace, with more workers added to the labor force in June than had been expected. The unemployment rate continues to hover at a rate among the lowest in three decades.

Some economists believe job growth in the coming months may be even greater, as the manufacturing sector, which has been shedding workers, begins to rebuild its work force in the face of an improving global economy. A recent survey by corporate purchasing managers found companies reporting greater activity in new orders, especially exports. Those usually presage increased employment.

Staff writer Stephanie Stoughton contributed to this report.

Ringing It Up

Sales rose more than expected last month for many retailers.

June sales

Percent change from a year ago













Circuit City






J.C. Penney


SOURCE: Bloomberg News