Economy gaining, not unemployment

Associated Press

WASHINGTON

The economy is showing signs of modest improvement — not enough to reduce high unemployment but enough to ease fears that another recession might be near.

Fewer people applied for unemployment benefits last week, though some of that was due to technical factors. And the economy grew slightly more in the April-June quarter than previously estimated. Growth is also expected to tick up in coming months.

Investors drew some hope from the latest data, as well as from news that Germany’s government approved a plan to bolster Europe’s response to its debt crisis. The Dow Jones industrial average finished up 143 points, or 1.3 percent, after a day of volatile trading.

Some of the news Thursday wasn’t encouraging. Chief executives of the nation’s largest companies are more pessimistic than they were just three months ago, according to a survey by a trade group, the Business Roundtable.

Only about one-third of the CEOs said they plan to hire or boost spending in the next six months. That’s down from about half who said so in June.

And fewer Americans signed contracts to buy homes in August, the second-straight month of declines.

The economy expanded at an annual rate of 1.3 percent in the April-June quarter, up from an estimate of 1 percent a month ago, the Commerce Department said. The improvement reflected modestly higher consumer spending and a bigger boost from trade.

Even so, the economy grew at an annual rate of just 0.9 percent in the first six months of the year. That’s the weakest six-month performance since the recession ended more than two years ago.

Many Americans are spending less because they’re paying off debt. That trend is likely to hold back the economy in the months ahead.

Weak consumer spending, high unemployment and financial market turmoil could slow growth for the rest of this year.

Most economists don’t expect another recession. But they also don’t see growth accelerating much. Many foresee a rebound to between 2 percent and 2.5 percent growth in the current quarter.

A forecasting panel for the National Association for Business Economics predicts that growth for all of 2011 will be just 1.7 percent.