U.S. productivity up as jobless claims remain high

Washington (Reuters): Aflurry of government and private sector reports on Thursday showed the U.S. economic recovery moving forward while also raising concerns about its durability.

Reports on business investment and worker productivity showed improvement, but these were offset by weak readings on retail sales and the economy's service sector as well as by stubbornly high rates of filings for jobless benefits.

"It's still the stumbling recovery," said Steve Ricchiuto, chief economist with ABN Amro in New York.

Despite the bevy of economic data out Thursday, economists were looking toward Friday's release of August unemployment for a more up-to-date read on the U.S. economy. Analysts polled by Reuters expect the jobless rate to hold steady at 5.9 percent, with payrolls posting a narrow 37,000-job gain.

Thursday's data did little to cheer a jittery Wall Street. The Dow Jones industrial average was off by 141.42 points, or 1.68 percent. The tech-laden Nasdaq composite fell by 41.31 points, or 3.20 percent.

In a weekly report, the Labor Department said claims for unemployment benefits fell in the week ended Aug. 31, the first decline since the week ended Aug 3. Claims dipped to 403,000 from a revised 411,000 in the previous week.

However, the fact that claims spent a second straight week above the 400,000 level — seen as a sign of a weak job market — raised fears the economy is struggling to generate jobs.

The four-week moving average, which many analysts look to as a more reliable indicator of trends in the report, also rose, climbing to 400,000 for the first time since June.

"The hemorrhaging of (jobs) has very nearly stabilized at a moderate pace, which constitutes one-half of the unemployment equation. It's the other half of the equation — rehiring — that has yet to show any renewed life," said Ken Mayland, chief economist with Clear View Economics in Pepper Pike, Ohio.

A stagnant labor market raises the risk consumers could pull back on their spending, which makes up two-thirds of overall economic activity. Reports on Thursday of sales at chain store retailers hinted at tighter purse strings — at least for items other than cars. Automobile sales have boomed recently with buyers lured by renewed financing incentives.

Major automakers reported on Wednesday that U.S. auto sales surged to their highest level this year in August, as consumers seized on interest-free loans and hefty cash rebates to buy new vehicles at a near-record pace.

August may have been a bumper month for auto dealerships, but things were not so bountiful for stores. August same-store sales grew 1.6 percent, not far from expectations for a rise of 1.5 percent for the month but down from a 3.6 percent increase a year ago, according to the Bank of Tokyo-Mitsubishi Ltd.

"It's a weak performance but it's coming in at about what we expected," said Michael Niemira, an economist with the bank. "But when you put the pieces together with car sales, it shows the consumer is willing to spend, but maybe not on apparel."

The government reports were more upbeat, however.