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New jobless claims, producer prices surge

American

American

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On Thursday February 18, 2010, 9:14 am

WASHINGTON (Reuters) - The number of U.S. workers filing new applications for unemployment insurance unexpectedly surged last week, while producer prices increased sharply in January, raising potential hurdles for the economic recovery.
Initial claims for state unemployment benefits increased 31,000 to 473,000, the Labor Department said on Thursday. That compared to market expectations for 430,000.
Another report from the department showed prices paid at the farm and factory gate rose a faster than expected 1.4 percent from December after a 0.4 percent gain in December, as higher gasoline prices and unusually cold temperatures helped boost energy costs.
"When you have PPI moving up and still no progress in the jobs situation, that doesn't bode well for continued improvement in equity prices," said Alan Lancz, president at Alan B. Lancz & Associates Inc in Toledo, Ohio.
U.S. stock index futures added to losses after jobless claims and producer price data, while government debt prices rose.
Last week was the survey week for the employment report for February, which is scheduled for release in early March.
The labor market, hardest hit by the worst recession in seven decades, has lagged the economic recovery that started in the second half of 2009. The economy has lost 8.4 million jobs since the start of the downturn in December 2007.
The PPI report may give investors, who keeping a wary eye on inflation following massive efforts by the Federal Reserve to pull the economy out of its worst slump since the Great Depression of the 1930s, something to worry about.
"The bottom line is that the Fed is going to have some decisions to make at its next meeting, since it seems inflation is now back on the table," said Lancz.
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Looks like reports of stimulus success are premature. They tried to pretty it up at the end, but an unexpected surge tell me that it isn't over.
 
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American said:
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Looks like reports of stimulus success are premature. They tried to pretty it up at the end, but an unexpected surge tell me that it isn't over.
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As to be expected, recovery in the labor market will be a bumpy road leading up to the summer. We have yet to see productivity numbers plateau, and when they do it will likely give a boost to job creation.
 
Goldenboy219 said:
As to be expected, recovery in the labor market will be a bumpy road leading up to the summer. We have yet to see productivity numbers plateau, and when they do it will likely give a boost to job creation.
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There is nothing in place to create a recovery in the labor market. The hint of impending taxes is going to just lead to more job losses.

And if stimulus is the answer, why aren't they spending much of the money. I have a feeling most of that money will be used for campaign expenses in an effort to save the Congress for the Democrats.
 
Erod said:
There is nothing in place to create a recovery in the labor market.
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As productivity numbers indicate, firms are getting more out of their workers and will continue to do so until they experience diminishing returns. At that point, we will most definitely see a boost in the labor market.

The hint of impending taxes is going to just lead to more job losses.
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Not necessarily.... While the instance of a tax increase can have a negative effect, nobody is in a position to establish elasticity at the moment. What we do know is that firms will often pass on tax increases to their consumers, and therefore the nature of demand is in question. Are you saying that demand will suddenly fall off?

And if stimulus is the answer, why aren't they spending much of the money.
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This is the major issue (along with fraud) in regards to policies that have demand boosting qualities. There is a general time lag in regards to appropriation, planning, spending, and then the ever important multiplier effect. But once we see it in the system, there is no denying its effectiveness.


I have a feeling most of that money will be used for campaign expenses in an effort to save the Congress for the Democrats.
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Such partisan bickering does not interest me, and has nothing to do with the OP or subject matter.
 
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