U.S. labor market, economy struggle despite reopening of businesses

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Sticky weekly jobless claims underscore U.S. labor market distress

Other data on Thursday reinforced expectations the economy would contract in the second quarter at its deepest pace since the Great Depression. Though orders for key capital goods rebounded in May, the increase recouped only a fraction of the prior declines. The goods trade deficit widened sharply last month as the respiratory illness disrupted trade further.

Businesses in many states reopened more than a month ago after shuttering in mid-March to try to slow the spread of COVID-19. Companies are hiring, but others are cutting jobs at nearly the same pace. A separate report from the Commerce Department showed orders for non-defense capital goods excluding aircraft, a proxy for business spending plans, increased 2.3% in May after dropping 6.5% in April. These so-called core capital goods orders are 5.6% below pre-pandemic levels.

Economists expect GDP could shrink at as much as a 46% annualized rate in the second quarter. The economy contracted at a 5% pace in the January-March quarter, the deepest downturn since the Great Recession. The jobless rate has been biased down since March by people incorrectly misclassifying themselves as being “employed but absent from work.”

 

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