WASHINGTON – Worker productivity growth slowed in the second quarter, retailers saw tepid sales in August, and new claims for unemployment benefits rose last week, according to reports that suggest the economy was still working through its “soft patch.”
For the most part, monthly retail figures released Thursday indicated that merchants had sluggish sales in August, a disappointing start to the important back-to-school shopping season.
Discounters and wholesale club operators such as Wal-Mart Stores Inc. and Costco Wholesale Corp. were especially hard-hit. Other stores, including Limited Brands and Talbots Inc., also struggled. But Neiman Marcus Group and similar high-end stores fared well.
“The impact of Hurricane Charley and the uneven pace of back-to-school sales has retailers reporting mixed results,” said Tracy Mullin, president of the National Retail Federation. “Retailers are ready to put the summer behind them.”
High energy prices and job worries also made some buyers cautious, analysts said.
New claims for unemployment benefits rose for the second week in a row, reflecting in part the lingering effects of Hurricane Charley.
For the week ending Aug. 28, new applications increased by a seasonally adjusted 19,000 to 362,000, the Labor Department said. A little less than half of the rise was blamed on the storm, which ripped through Florida on Aug. 13.
A separate report showed that workers’ productivity increased at an annual rate of 2.5 percent in the second quarter, the smallest gain since late 2002.
The increase in productivity – the amount an employee produces for every hour on the job – was down from an initial estimate of a 2.9 percent growth rate for the April-to-June quarter. By comparison, the rate was 3.7 percent during the first three months of the year.
Production overall slowed in the second quarter, restraining the increase in productivity.
The gross domestic product, which measures the value of all goods and services produced within the United States, rose at an annual rate of 2.8 percent in the second quarter, compared with a 4.5 percent growth rate in the first quarter.
President Bush and Democratic rival John Kerry have sparred over the economy and the availability of jobs.
The president says making his tax cuts permanent will strengthen the economy and produce new jobs. Kerry contends the tax cuts have mainly benefited the wealthy, squeezed the middle class and have not led to significant job growth.
The economy has lost 1.1 million jobs since Bush took office in January 2001.
In the productivity report, the 2.5 percent growth rate was the smallest since a 1.6 percent rated in the final quarter of 2002.
“The current rate of productivity is still decent, given the lackluster pace of overall economic growth in the second quarter,” said Richard Yamarone, economist at Argus Research Corp.
Efficiency gains are important to the economy’s long-term vitality. They allow the economy to grow faster without igniting inflation. Companies can pay workers more without raising prices, which would eat up those wage gains.
Associated Press
The back-to-school shopping season resulted in disappointing sales for retailers such as American Eagle in Plymouth Meeting, Pa.
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