New data on jobs, housing signal no recovery near

WASHINGTON (AP) — Worse-than-expected news on unemployment and home sales Thursday dampened optimism that a broad economic recovery might be near.

The Labor Department said initial claims for unemployment compensation rose to a seasonally adjusted 640,000, up from a revised 613,000 the previous week. That was slightly more than analysts' expectations of 635,000.

Economists are closely watching the unemployment compensation data because they believe a sustained decline in the number of initial claims could signal the end of the recession is nearing. Jobless claims have historically peaked six to 10 weeks before recessions end, according to a report by Goldman Sachs. Initial claims reflect job cuts by employers.

But the latest report shows job losses remain high. The four-week average of claims, which smooths out volatility, dropped slightly to 646,750, about 12,000 below the peak 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.

Abiel Reinhart, economist at JPMorgan Chase Bank, said further declines in the four-week average "would show that our forecast for a resumption of economic growth in (the third quarter) is reasonable."

Other economists said that despite the bigger-than-expected rise in new jobless claims, the range has remained mostly steady for about two months. That's a signal that the pace of layoffs may be leveling off.