Economic Data Dips, Surges

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June 30, 2005--Reports released Thursday by the Departments of Labor and Commerce provided mixed messages on the economy, while House Democrats released a report claiming that conditions for small businesses are at an eight year low.

The best news came from the Labor Department, which said that initial claims for state unemployment insurance dropped by 6,000 to 310,000 for the week of June 25, while the less volatile four-week moving average fell by 10,250 to 323,500. It was the second straight week that claims fell, with the largest drops coming in the Carolinas and Georgia as a result of fewer layoffs by textile companies.

The unemployment news seemed to suggest that May's dismal payroll survey, which found that only 78,000 jobs were created, was an aberration rather than an indication of a more permanent slowdown. While administration officials and the National Federation of Independent Businesses have insisted that the employment picture is strong, pointing to encouraging data from the bureau's household survey of unemployment, Democrats on the House Small Business Committee said that the May data was evidence of a poor business climate.

Citing health care and energy costs, as well as credit conditions and labor costs as barriers to job creation, Democrats announced that the Small Business Index fell 1.9% in the first quarter of 2005. "Policies need to be implemented that address the existing poor economic conditions," said New York Democratic representative Nydia Velazquez in a statement.

In another report, the Commerce Department announced that personal income growth was flat in May, increasing by only 0.2%. The growth was well below the 0.6% increase in April and was the worst showing since January, when it fell by 2.5%. The department's personal consumption expenditures index -- reportedly favored by Federal Reserve chairman Alan Greenspan as an indicator of inflation -- was unchanged in May after increasing 0.4% last month. The Fed is nonetheless expected to announce another quarter-point interest rate hike later today.

Max Chafkin

Senior writer Max Chafkin has profiled companies such as Yelp, Zappos, Twitter, Threadless, and Tesla for the magazine. He lives in Brooklyn, New York.