Applications for unemployment benefits continued to rise in the past week, while inflation pushed higher and a key manufacturing index weakened.
The weekly jobless claims number, which is closely watched as an indicator for employment trends, unexpectedly rose 11,000 to 428,000, well ahead of estimates of 411,000.
The consumer price index, meanwhile, gained 0.4 percent when including volatile food and energy prices, after an increase of 0.5 percent in July. The so-called core CPI, though, gained 0.2 percent, which was in line with expectations.
Consumers paid more for a range of goods and services last month, pushing up inflation and squeezing Americans' purchasing power.
For the 12 months ending in August, the core index surged 2 percent, the biggest year-over-year increase in nearly three years. That's at the top end of the Federal Reserve's informal inflation [cnbc explains] target. It could limit the central bank's ability to take further steps to try to revive the economy.
Food prices rose 0.5 percent, the biggest increase since March. That was due to higher prices for cereals and dairy products. Energy costs increased 1.2 percent.
"The large CPI gain in the face of weakening confidence, slowing consumer spending and softening production provides a poor backdrop for expansion," said Citigroup economist Steven C. Wieting in a note to clients.
Other indicators from a major government data release this moring also were not not encouraging: New York manufacturing activity contracted in September for the fourth consecutive month.
Also, the US current account deficit narrowed unexpectedly to $118 billion in the second quarter from a revised $119.6 billion in the first quarter as exports hit a record high.
As a percentage of gross domestic product, the current account deficit—which measures the flow of goods, services and investments in and out of the US—narrowed to 3.1 percent in the second quarter from 3.2 percent in the first quarter.
Exports of goods and services rose to $716.7 billion, eclipsing the previous high set in the second quarter of 2008.
Economists had been expecting the current account gap to widen to $122.5 billion from a previously reported $119.3 billion.
Jobs Market Languishing
The number of people applying for unemployment benefits jumped last week to the highest level in three months.
Applications have been rising over the past month, a signal that the job market remains depressed.
Applications typically drop during short work weeks, as was the case with the Labor Day observation. In this case, applications didn't drop as much as the department expected, so the seasonally adjusted value rose. A Labor spokesman said the total wasn't affected by Hurricane Irene.
Still, applications appear to be trending up. The four-week average, a less volatile measure, rose for the fourth straight week to 419,500.
Applications need to fall below 375,000 to indicate that hiring is increasing enough to lower the unemployment rate. They haven't been below that level since February.
The economy added zero net jobs in August, the worst showing since September 2010. The unemployment rate stayed at 9.1 percent for the second straight month.
The job figures were weak because companies hired fewer workers and not because they stepped up layoffs, economists said. Business and consumer confidence fell last month after a series of events renewed recession fears.
The government reported that the economy barely grew in the first half of the year. Lawmakers fought over raising the debt ceiling. Standard & Poor's downgraded long-term U.S. debt for the first time in history. Stocks tumbled—the Dow lost nearly 16 percent of its value from July 21 through Aug. 10.
Businesses added only 17,000 jobs in August, which was a sharp drop from 156,000 in July. Government cut 17,000 jobs. Combined, total net payrolls did not change.
Unemployment benefit applications are considered a measure of the pace of layoffs.
The total number of people receiving benefits dipped 12,000 to 3.73 million, the third straight decline. But that doesn't include about 3.4 million additional people receiving extended benefits under emergency programs put in place during the recession. All told, about 7.14 million people received benefits for the week ending Aug. 27, the latest data available.
More jobs are desperately needed to fuel faster economic growth. Higher employment leads to more income. That boosts consumer spending, which accounts for about 70 percent of economic growth.
Higher gas and food prices have cut into their buying power this year. The economy expanded at an annual rate of just 0.7 percent, the slowest growth since the recession officially ended two years ago.
The weakness has raised pressure on the Federal Reserve and the White House to take steps to boost economic growth.
Many economists expect they will decide at its meeting next week to shift money out of short-term mortgage-backed securities and into longer-term Treasury bonds. The move could push down longer-term interest rates, including rates on mortgages, auto loans and other consumer and business borrowing.
President Barack Obama has proposed a $447 billion job-creation package. He wants to cut Social Security taxes for workers, extend unemployment benefits, cut taxes for small businesses and spend more federal money to build roads, bridges and other public works projects.
Republicans oppose the president's plan, particularly after he said he wants to pay for it with higher taxes on wealthier households, hedge fund managers and oil companies.
© 2011 CNBC.com
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