Economy’s improvement is fitful, reports show

WASHINGTON (AP) — A bit of sour news Thursday — in the form of increased jobless claims and higher wholesale prices — suggested the economy is moving in fits and starts even as the recession eases.

Analysts said the pace of unemployment claims should ease after auto industry layoffs are completed. Inflation, meanwhile, remains under control, and any threat of a dangerous bout of falling prices seems remote.

The number of new jobless claims rose to a seasonally adjusted 637,000, from a revised 605,000 the previous week, the Labor Department said. That exceeded analysts’ expectations of 610,000.

Economists noted that initial claims remain below a peak reached in late March — a sign that the wave of mass layoffs announced earlier this year likely has crested.

“This is yet more evidence that we are now past the worst,” Paul Dales, U.S. economist at Capital Economics, wrote in a research note.

Separately, the department said wholesale prices climbed 0.3 percent last month, larger than the 0.1 percent gain economists had expected. The biggest jump in food costs in more than a year offset a second monthly decline in the price of energy products.

A 43.7 percent jump in egg prices helped drive food costs higher. The increase, the largest on records dating to 1992, was partly a one-time blip, because Easter occurred in April, according to Labor Department economist Scott Sager. The same dynamic drove pork prices up 2.5 percent.

The overall 1.5 percent increase in food costs also represents a leveling off after food prices fell in four of the previous five months, economists said.

Even with the larger-than-expected gain in the Producer Price Index, wholesale prices over the past year have dropped 3.7 percent. That’s the biggest 12-month decline since 1950.

Though falling prices can raise fears about “deflation,” economists say efforts by the Federal Reserve to combat the recession should prevent falling prices. Any prolonged deflation would drag down Americans’ wages and further depress home and stock prices.

Falling prices remain a concern in other parts of the world, such as Japan, which suffered a destabilizing bout of deflation in the 1990s. Price declines also have been registered in China and India.

Wall Street brushed off the reports, and stocks rose modestly. The Dow Jones industrial average added more than 46 points to 8,331.32, while broader indexes also rose.