WASHINGTON — The economy is having growing pains.
Discouraging new reports on unemployment and manufacturing Thursday reinforced worries that job losses and meager factory output will make for a weak recovery as the nation climbs out of the worst recession in decades.
Stocks tumbled in response. The Dow Jones industrial average had its worst day since early summer, falling 203 points to 9,509. Just last week, it was within shouting distance of 10,000.
“The economy is not moving quickly from recession to expansion. It is moving in a very halting way,” said Mark Zandi, chief economist at Moody’s Economy.com. “Given the severity of the downturn, we are not going to come roaring back.”
First-time jobless claims rose more than expected last week to a seasonally adjusted 551,000, the Labor Department said. Economists viewed it as a sign that employers remain reluctant to hire.
Economists think the economy lost 180,000 more jobs in September. The unemployment rate is expected to climb from 9.7 percent to 9.8 when the government releases its monthly jobs report Friday.
And factories are struggling to mount a rebound. A gauge of manufacturing activity came in at 52.6 for September, the Institute for Supply Management said — enough to signal growth for the second straight month but still down from August.
The gloom on Wall Street to start the fourth quarter came despite encouraging signals on consumer spending and construction.
Construction spending rose 0.8 percent in August, including the biggest increase in housing activity in nearly 16 years. But spending for office buildings, hotels, shopping centers and government projects all declined.
Consumer spending rose a bigger-than-expected 1.3 percent in August, the best gain since October 2001, when the country was recovering from the Sept. 11 terrorist attacks. But about a third of that increase came from the government’s Cash for Clunkers program.
Once the trade-in program ended, car sales fell back. General Motors and Chrysler said Thursday that their sales fell more than 40 percent in September. Ford reported a 5.1 percent drop.
The August spending report showed personal incomes continue to lag: They edged up 0.2 percent, helped by an increase in the minimum wage that took effect in July.
Economists fear weak income growth means that the jump in consumer spending won’t last. Consumer spending is vital for a sustained recovery because it accounts for about 70 percent of all economic activity.
The jump in spending and the much smaller gain in income sent the personal savings rate down to 3 percent in August, from 4 percent in July. Analysts think Americans will keep saving more in the months ahead, trying to rebuild their nest eggs.
Many economists believe the economy is growing again after the longest recession since World War II — perhaps at a rate of 3 percent or more in the just-ended third quarter.
But David Wyss, chief economist for Standard & Poor’s in New York, said he expects growth to slip to an anemic 0.8 percent in the final three months of this year, and perform only a little better next year.
“The good news is that it will be positive, but it will not be a barnburner,” he said.
Weak growth like that would not be strong enough to bring down the unemployment rate. Wyss predicts it will peak at 10.4 percent around the middle of next year. The recession has already eliminated almost 7 million jobs.
Those losses are weighing on Americans as they struggle to pare debt and build up savings accounts decimated by the stock market slide. And tighter lending has made spending difficult even for people who want to shop.
“With all that is going on, this is going to be a subdued rebound — two steps forward and one step backward,” said Sal Guatieri, an economist with BMO Capital Markets.
The rise in jobless claims last week came after three weeks of declines. The four-week average, which smooths out fluctuations, dropped to 548,000. That’s well below the peak, in early April, but signals a weak labor market.
Unemployed workers are having a hard time finding new jobs. The number of people continuing to collect unemployment benefits fell by 70,000 last week to the lowest level since April, but there were 6.1 million still on the jobless rolls.
When federal emergency programs are included, almost 9 million people were getting jobless benefits in the week that ended Sept. 12. That’s little changed from the previous week.
Congress has already added as much as a year of extra benefits on top of the roughly six months provided by most states. Congress is considering extending benefits even further, but the Senate plan was being slowed Thursday by some lawmakers upset that their states would be left out.comments powered by Disqus