US recovery fails to create jobs

The US jobs market today showed unexpected weakness as the number of workers filing initial claims for unemployment benefits rose last week.

The number of people filing for state benefits rose by 3,000 to 422,000 in the week ending on September 6, the labour department said. The increase, bringing claims to their highest level since early July, confounded Wall Street expectations for a drop to 400,000 from the previous week of 413,000.

"The US labour market has become a cause for concern lately, as recovery in business activity does not appear to be generating new jobs," said Andrij Halushka, economist with the Centre for Economics and Business Research in London.

Recent economic data have indicated a pickup in US economic growth. For the second quarter, gross domestic product expanded at 3.1% and private investment, led by continued spending on equipment and software, has risen at the fastest pace since early 2000, indicating an upturn in capital spending.

The European commission today said that the US was set to lead a global economic recovery in the second half of this year and growth would gather further pace in 2004.

"The US economy should lead the global recovery with a gradual pick up in the rest of the world expected for the second half of 2003. Growth is expected to gather further pace in 2004," the commission said in a document used as preparation for this week's meeting of European finance ministers in Italy.

Yet despite signs of a pickup in economic activity in the US, firms have been reluctant to hire, leaving the unemployment rate stuck above 6%. In all, 2.8 million people have lost their jobs in the so-called jobless recovery under the Bush presidency.

In other economic data, the US trade deficit expanded in July to $40.3bn (£25.3bn) as imported goods from China and the quantity of overseas crude oil sold to the US each hit record highs.

Imports of goods and services came to $126.5bn, the second-highest level on record, and a 1.6% increase from June. As the US economy strengthens, so has the appetite for imports.

America's politically sensitive trade gap with China widened by 13.5% from June to July to a record $11.3bn. Imports from China came to $13.4bn, an all-time monthly high. The White House is coming under pressure from US manufacturers to persuade Beijing to revalue its currency, the renminbi, because of the influx of cheap Chinese products on to American markets.