WASHINGTON - The economy grew slightly faster than initially thought in the first quarter, while the job market remained sluggish last week, according to U.S. data released on Thursday.
Gross domestic product, which measures total output of goods and services within U.S. borders, grew at a 1 percent annual pace in the first three months of 2008, matching economists' forecasts and a touch stronger than the 0.9 percent growth estimated by the Commerce Department last month.
The figure was initially reported in April at an anemic 0.6 percent, fueling concerns that the U.S. economy may be slipping into recession. However, those concerns have subsided as fresh data showed healthier growth, particularly in consumer spending and exports.
Consumer spending, which accounts for more than two-thirds of national economic activity, rose at a 1.1 percent rate in the quarter, slightly ahead of the preliminary estimate of 1 percent last month. Despite that upward revision, consumer spending posted its smallest gain since the second quarter of 2001, which was during the last recession.
The U.S. Federal Reserve's interest rate-setting committee pointed to stronger consumer spending as a sign that the economy was hanging on despite the housing sector slump and subsequent credit contraction. The central bank left interest rates unchanged on Wednesday and signaled that it may soon be ready to raise borrowing costs if inflation keeps building.
Thursday's Commerce Department report showed that prices continued to rise in the first quarter. The price index for gross domestic purchases, a closely watched measure of inflation, rose at a 3.6 percent rate, up 0.1 percentage point from the preliminary estimate. Excluding food and energy, the price index was up 2.3 percent.
The report also showed that exports, which have been among the few bright spots in the economy, rose 5.4 percent, which was much better than the estimate of 2.8 percent in May. Imports of goods and services fell 0.7 percent, a more modest decline than the 2.6 percent drop estimated last month.
Jobless claims stay high
Separately, the Labor Department reported the number of workers filing new claims for jobless benefits was unchanged last week, although a separate gauge that irons out volatility rose to the highest since 2005.
"Layoffs are rising as companies begin to realize that the credit-driven go-go days are over and aren't coming back," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients.
Initial claims for state unemployment insurance benefits stood at a seasonally adjusted 384,000 last week, matching the revised level in the previous week. Analysts polled by Reuters had forecast 380,000 new claims.
The four-week average of new jobless claims, a better measure of underlying labor trends because it irons out week-to-week volatility, rose to 378,250 from 376,000 the week before, the highest since October 2005 in the aftermath of Hurricane Katrina.
The number of people still claiming benefits after drawing an initial week of aid rose 82,000 to 3.139 million in the week ended June 14, the most recent week for which data is available.
It was the highest reading for so-called continued claims since February 2004 and the ninth straight week above 3 million, a sign the weak economy was making it harder for U.S. workers to find jobs.
A Labor Department official said there had been 4,000 flood-related initial claims from Iowa, but no other special factors to influence the data. Severe storms in the U.S. Midwest inundated towns along the Mississippi and other rivers and flooded thousands of acres of farmland.