WASHINGTON (AP) — The US trade deficit in July hit the highest level in six months as a record rise in imports outpaced a third straight increase in foreign demand for American products, according to government data released Thursday. Both gains provided more evidence that the most worst recession since the 1930s was losing its grip on the global economy.
A rebound in the American labor market has yet to take hold, but first-time claims for jobless benefits did fall more than expected last week.
Companies are laying off fewer workers as the US economy shows consistent signs that the recession is over. The Federal Reserve said Wednesday that 11 of its 12 regional banks reported the economy is stabilizing, an improvement from previous reports.
The Commerce Department said Thursday that the trade deficit rose 16.3 percent to $32 billion in July, much larger than the $27.4 billion imbalance that economists had expected. It was the largest imbalance since January and the percentage increase was the biggest in more than a decade.
Imports rose 4.7 percent to a total of $159.6 billion, the largest monthly advance on records that date to 1992 and the second consecutive gain after 10 straight declines. The rebound reflected a 21.5 percent spike in imports of autos and auto parts, partly due to increased production at US auto plants owned by General Motors and Chrysler that had been slowed when the companies were struggling to emerge from bankruptcy protection.
Exports edged up 2.2 percent to $127.6 billion. It marked the third straight monthly increase, but left exports well below their record level of $164.4 billion set in July 2008.
The export gains reflected big increases in shipments of civilian aircraft, computers, industrial machinery and medical equipment.
American companies have been hampered by a drop in demand at home and in major export markets as the recession that began in the US spread worldwide. However, economists are hoping that a rebound in global economies as well as further weakening in the value of the dollar will help boost exports in coming months. A weaker dollar makes US products less expensive in overseas markets.
“While wider trade deficits are normally not good news, in this case, the rise in demand for foreign consumer and business goods tells us the US economy is healing,” Joel Naroff, president of Naroff Economic Advisors, wrote in a note to clients. “This was a positive report in that it provides further evidence that both the U.S. and foreign economies are coming back.”
So far this year, the deficit is running at an annual rate of $355.5 billion, about half of last year’s total. Economists believe the deficit will keep rising in the months ahead, reflecting stronger growth in the US and rising oil prices. They expect the imbalance in 2010 will approach levels seen before the recession hit.
On the jobs front, the Labor Department said Thursday that initial claims for unemployment insurance fell to a seasonally adjusted 550,000 from an upwardly revised 576,000 in the previous week. Analysts expected claims to drop to 560,000, according to Thomson Reuters.
The number of people continuing to receive benefits fell by 159,000 to nearly 6.1 million, the lowest level since early April.
Still, unemployment claims remain significantly above levels associated with a healthy economy and indicate that jobs remain scarce. Weekly initial claims are generally at 325,000 or below in a growing economy. A year ago, only 3.5 million people were receiving unemployment aid.
“The labor market’s healing process is agonizingly slow,” Joshua Shapiro, chief economist at MFR Inc., wrote in a note to clients.
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