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U.S. data point away from another recession

Gross domestic product rose at an annual rate of 1.3% in the second quarter, the Commerce Department said. Meanwhile, the Labor Department reports a drop in claims for unemployment benefits.

September 30, 2011|By Jim Puzzanghera, Los Angeles Times
  • The Labor Department reported that weekly claims for unemployment insurance dropped 37,000 last week to 391,000, the lowest figure since early April. Above, job seekers at a job fair in Vancouver, Wash.
The Labor Department reported that weekly claims for unemployment insurance… (Rick Bowmer, Associated…)

Reporting from Washington — The economy grew slightly more than previously estimated in the last quarter and weekly jobless claims fell to their lowest number in five months, signs that the nation may not be heading into another recession.

The economy grew at an annual rate of 1.3% from April through June, an anemic but marginally better pace than the most recent estimate of 1%, federal officials said Thursday.

The revised data on total economic output, also known as gross domestic product, narrowly beat expectations.

Also Thursday, the Labor Department reported that weekly claims for unemployment insurance dropped 37,000 last week to 391,000, the lowest figure since early April.

Economists said claims below 400,000 were a positive sign for job growth. The unemployment rate was 9.1% in August after the economy failed to add any new jobs.

Even so, a private report Thursday indicated that only about a third of the nation's chief executives expected to hire employees any time soon.

The two government reports indicate that fears of another recession are unwarranted right now, said Chris Rupkey, chief financial economist for the Bank of Tokyo-Mitsubishi in New York.

"The economy is not teetering on the edge of a cliff, getting ready to fall over into a recession," he said.

Technically, a recession is determined by two straight quarters of negative growth.

In the first three months this year, the economy barely grew, expanding at an annual rate of just 0.4%, leading to fears of double-dip recession as the economy struggled to recover from the deep downturn that technically ended in June 2009.

The Commerce Department originally had estimated second-quarter economic growth at 1.3% in July but revised the figure down to 1% last month.

Despite the somewhat improving outlook, major corporate chief executives aren't very optimistic about the direction of the economy.

Their expectations for sales, capital expenditures and adding U.S. jobs dropped significantly in the third quarter, according to findings released Thursday from the Business Roundtable's CEO Economic Outlook Survey.

"While we still see strong business fundamentals in America, the quarterly survey results reflect increased uncertainty among CEOs concerning the economic climate and business environment," said Boeing Co. Chief Executive Jim McNerney, chairman of the group.

For example, the survey found that 36% of CEOs expected to add employees in the U.S. in the next six months, down from 51% in the second-quarter survey. And 24% expected to lay off workers over the same period, up from 11%.

McNerney and the group's president, John Engler, said that although the outlook by corporate leaders was down, they were not anticipating a recession. The survey's overall index showed expectations of positive growth.

"We're still in the expansion category, albeit at a slower anticipated rate than the last quarter," McNerney said.

The latest CEO survey estimated that GDP would grow 1.8% in 2011, down from a projection of 2.8% in the second-quarter survey.

jim.puzzanghera@latimes.com

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