While U.S. consumer spending rises unemployment jumps, too

Although Americans’ spending rose last month at its fastest pace in nearly 8 years, the number of new claims for jobless benefits rose last week, indicating a weak labor market would weigh on economic recovery.

For the fourth straight month U.S. spending was up, jumping 1.3 percent in August after rising a meager 0.3 percent in July, the largest gain since 2001, the Commerce Department said Thursday. Economists had expected a 1.1 percent gain in spending, which normally accounts for over two-thirds of U.S. economic activity.

In a separate study released last week the Labor Department reported that the number of state unemployment insurance claims rose to 551,000, a jump from the previous week’s 534,000 that reportedly surprised analysts.

“Although we have seen improvements in the monthly statistics, the labor markets remain the weak link in this recovery process. It will be a while before they provide any kind of support, especially to consumer spending,” said Kevin Flanagan, fixed income strategist for Global Wealth Management in New York.

There are concerns that weak domestic consumption could stall recovery of the economy. While analysts agree the economy’s healing has started, many worry that high unemployment and the resulting pressure on U.S. incomes might translate into a lethargic growth.

Government data on Wednesday showed spending dropped at a 0.9 percent annual rate in the second quarter after rising 0.6 percent in the January-March period. Personal income rose 0.2 percent in August after rising 0.2 percent in July, according to the Commerce Department.

Continued claims of workers still collecting jobless aid after an initial week of benefits fell to 6.09 million in the week ending September 19 from a revised 6.16 million in the prior week.