Data raises questions about strength of U.S. economy

The U.S. economy showed worrisome signs as jobless claims rose sharply last week while ground-breaking at home construction sites tumbled in April and a gauge of underlying inflation pointed to weak demand.The data could fuel fears over the impact of a government austerity drive that began in January, and could raise pressure on the Federal Reserve to keep its money printing press running on overdrive as the central bank buys bonds to support the economy.The number of Americans filing new claims for unemployment benefits climbed last week at the fastest pace in six months, the Labor Department said on Thursday. Initial claims for state unemployment benefits jumped by 32,000 to 360,000. That was the biggest jump since November and confounded analysts’ expectations for a more modest increase.“I think there’s plenty of slack in the labor market.,” said Tanweer Akram, an economist with ING U.S. Investment Management in Atlanta.Futures indexes for U.S. stocks turned lower following the data’s publication, as did yields on U.S. government debt. The dollar weakened against the euro and the yen.A Labor Department analyst said no states had estimated their data, and that there were no signs furloughs for government employees played a significant role in last week’s increase in claims.The U.S. economy has shown signs that growth slowed late in the first quarter and in April as Washington’s push to trim the budget deficit weighed on consumers and businesses. The federal government hiked taxes in January and initiated sweeping budget cuts in March.Data on jobless claims has been a relative bright spot in the U.S. labor market, and analysts will be cautious over reading too deeply into one week of dour data, which showed claims at their highest since late March.Many analysts have noted that a reticence by employers to lay off workers has made an outsized contribution to recent improvements in employment levels. Last month, employers on net added 165,000 new jobs to their payrolls while the unemployment rate dropped to a four-year low at 7.5 percent.Housing has also been an economic bright spot, but a separate report showed ground-breaking for new U.S. homes plummeted more than expected in April.The Commerce Department said starts at building sites for homes fell 16.5 percent last month to a 853,000-unit annual rate. Still, permits to build new homes increased, a reassuring reminder that the housing sector could still contribute to the economic recovery.

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Data raises questions about strength of U.S. economy