US 'jobless Recovery' Ploughs on

Further evidence of America's so-called jobless recovery emerged today as the number of people filing new claims for unemployment benefits last week climbed to their second highest level this year.

The labour department reported that new applications for jobless benefits rose 30,000 to 442,000 for the work week ending April 12. The increase pushed claims to their highest point since March 29, when claims hit 443,000, the highest level of the year.

The latest indication of US economic sluggishness came as President George Bush this week turned his focus to domestic matters from war in Iraq. Mr Bush yesterday urged Congress to approve his tax cuts in order to stimulate the economy. Although the president enjoys high overall ratings, less than 50% of Americans approve of his handling of the economy.

Businesses, struggling to make profits in a weak economy, have been reluctant to increase capital spending and hire workers. In the earnings season so far, corporate giants such as Microsoft have warned of difficult conditions ahead, despite reporting profits.

The US economy will expand just 2.2% this year, slower than last year's 2.4% pace, the International Monetary Fund forecast last week. It means that the world's largest economy is not growing fast enough to absorb new workers coming on to the job market.

But other major economies are failing to pick up the slack. The IMF expects even slower growth for some nations that buy American goods, such as Japan and the dozen of nations that share the euro.

Economists believe the US unemployment rate - now at 5.8% - is likely to rise in the next few months, a development that will worry the White House as it gears up for next year's presidential election campaign.

After sliding into recession in 2001 following 10 years of expansion, recovery has been patchy. Growth has been uneven from quarter to quarter, feeding the sense of uncertainty among companies.

The number of unemployed people continuing to draw jobless benefits went up by 76,000 to 3.57 million for the week ending April 5, the highest level in continuing jobless claims since November 9, 2002.

For nine weeks running, jobless claims have been above the 400,000 mark, a level associated with a stagnant job market. Today's figures were weaker than economists were expecting.

The US lost almost half a million jobs in the past two months as companies such as hand-tool maker Stanley Works and cellular telephone manufacturer Motorola axed staff. Economists worry that longer jobless queues may weaken consumer confidence, feeding a vicious circle.

To stimulate growth, the Federal Reserve has cut interest rates to 1.25%. But it is taking longer than analysts expected for companies to recover after the hi-tech bubble burst three years ago.