US unemployment aid applications rise to 386K - CBS News 8 - San Diego, CA News Station - KFMB Channel 8

US unemployment aid applications rise to 386K

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WASHINGTON (AP) — More Americans sought unemployment aid last week, suggesting hiring remains sluggish.

The Labor Department said Thursday that weekly unemployment benefit applications rose 6,000 to a seasonally adjusted 386,000. The increase came after the government revised the previous week up to 380,000.

The four-week average, a less volatile measure, rose for the third straight week to 382,000. That's the highest in six weeks.

Weekly applications are a measure of the pace of layoffs. When they drop below 375,000, it typically suggests hiring is strong enough to reduce the unemployment rate.

"The trend in jobless claims suggests ... that the underlying pace of employment growth has softened," said Bricklin Dwyer, an economist at BNP Paribas.

Applications fell steadily during the fall and winter but have since leveled off.

At the same time, hiring has slowed, raising concerns about the pace of the recovery. Employers added an average of only 96,000 jobs per month in the past three months. That's down from an average of 252,000 in the previous three months.

Weaker hiring also pushed up the unemployment rate in May to 8.2 percent, its first rise in nearly a year.

Joseph LaVorgna, an economist at Deutsche Bank, said the increase in applications was "slightly disconcerting" but added that more data would be needed to establish a trend. Still, he forecasts that the economy will gain only 75,000 jobs this month.

Faster job creation is crucial in order to accelerate growth. More jobs mean more income for consumers, which may lead to higher spending. Consumer spending fuels about 70 percent of the economy.

The number of people continuing to receive benefits fell sharply, partly because extended benefit programs are ending in many states.

The total benefit rolls fell to 5.8 million in the week ending May 26, the latest data available. That's a drop of 146,000 from the previous week.

Many economists blame the slowdown in hiring partly on the unusually warm winter. Companies moved up some hiring in January and February that normally would have occurred in spring. As that trend fades, job gains might recover in the coming months.

Federal Reserve Chairman Ben Bernanke said last week that the warm winter might be a reason for the slowdown in hiring. He also suggested that the burst of job gains earlier this year could have represented a "catch-up in hiring' by employers who cut too deeply in the recession.

In that case, stronger economic growth would be needed to boost hiring further, Bernanke said.

For now, the economy appears to be sputtering. It expanded 1.9 percent in the first quarter, down from 3 percent in the October-December quarter. Growth isn't expected to improve much in the current April-June quarter.

Consumers remain cautious. Retail sales fell 0.2 percent in May, the Commerce Department said Wednesday, matching April's decline. It was the first back-to-back drop in two years.

A big reason for the decline was falling prices at the gas pump, which reduced gas station sales. The average price for a gallon of gas was $3.54 Wednesday, according to AAA. That's 40 cents cheaper than the peak in early April.

That drop should free up more cash for consumers to spend in the coming months, which could accelerate spending this summer, economists said.

The economy is still struggling three years after the recession officially ended in June 2009. Wages haven't kept up with inflation. State and local governments have continued to shed jobs.

The United States has regained less than 3.8 million, or 43 percent, of the 8.8 million jobs lost during and immediately after the recession.

Copyright 2012 The Associated Press.

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