Consumer spending, jobless claims dip

WASHINGTON (AP) — The number of newly laid-off workers signing up for unemployment benefits dropped unexpectedly last week, but the number of people continuing to draw jobless aid rose to nearly 6.3 million, setting a record high for the 13th straight week.

Meanwhile, consumer spending fell more than expected in March while personal savings rose, fresh evidence that the economy is still struggling to emerge from the recession.

The Labor Department said Thursday that new applications for unemployment aid fell to a seasonally adjusted 631,000 last week. That was down from the prior week's 645,000, which was revised slightly higher from the government's initial estimate.

Economists had expected a small increase in new jobless claims.

The four-week moving average of initial jobless claims, which smooths out volatility, dropped last week to 637,250. That was the lowest level since late February and a decrease of about 20,000 from the high in early April. Goldman Sachs economists have said a decline of 30,000 to 40,000 in the four-week average is needed to signal a peak.

Still, the number of people continuing to draw unemployment benefits jumped to more than 6.27 million, the highest on records dating back to 1967 and steeper than economists expected.

Meanwhile, the Commerce Department said consumer spending dropped 0.2 percent in March, worse than the 0.1 percent decline economists expected. Incomes, reflecting persistent mass layoffs, dropped 0.3 percent, also worse than expected.

The personal savings rate rose to 4.2 percent from 4 percent in February. It stood at 4.4 percent in January, the first time in more than a decade the rate has been above 4 percent for three straight months.

Households have been cutting back on spending and boosting savings during the recession, worried that they need to replenish depleted nest eggs as job cuts mount and investment values plunge.

The fact that spending turned negative in March after two straight gains is a worrisome sign. Consumer spending in the first quarter grew at a 2.2 percent annual rate after two consecutive quarters of declines, but some analysts said that may be just a blip. Economists closely watch consumer spending because it accounts for 70 percent of total economic activity.