Friday, September 3, 2004

Economy sluggish in spring quarter

By Jeannine Aversa
The Associated Press

WASHINGTON - Workers' productivity increased at an annual rate of 2.5 percent in the spring, the smallest gain since late 2002, reflecting the economy's slowdown.

The increase in productivity - the amount an employee produces for every hour on the job - was down from an initial estimate of a 2.9 percent growth rate for the April-to-June quarter and marked a deceleration from the 3.7 percent pace posted in the first three months of this year, the Labor Department reported Thursday.

The new reading on second-quarter productivity was slower than the 2.8 percent pace some analysts were forecasting.

A major factor restraining the increase in productivity in the second quarter was a big slowdown in overall production. Gross domestic product, which measures the value of all goods and services produced within the United States, rose at an annual rate of 2.8 percent in the second quarter, compared with a 4.5 percent growth rate in the first quarter.

In other economic news:

• The start of the back-to-school shopping season was a disappointment for major retailers. Wal-Mart Stores Inc., Limited Brands, Talbots Inc. and Costco Wholesale Corp. were among the companies issuing reports of sluggish sales for August.

• New claims for unemployment benefits rose for the second week in a row, reflecting the lingering impact of Hurricane Charley, the Labor Department said. For the week ending Aug. 28, new applications increased by a seasonally adjusted 19,000 to 362,000. A little less than half of the rise was blamed on the storm, which ripped through Florida on Aug. 13, a government analyst said.

• Orders to U.S. factories grew by 1.3 percent in July, following a 1.2 percent advance in June. The increase in July was led by a big jump in demand for commercial aircraft and parts. Orders for "nondurable" goods, such as food products and chemicals, went up 1 percent in July for the second straight month.

On the layoffs front, jobless claims for the week ending Aug. 21 climbed by 10,000 - about half of that was attributed to the hurricane.

Hurricane-related claims showed up in the weeks after the storm as people were able to get out to employment offices to file applications for benefits.

The impact of the storm makes it difficult to discern underlying trends in the health of the labor market, whose recovery has been slow and uneven.

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