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This Week's Economic Roundup

Rising labor and energy costs make business owners skittish; gas prices continue to surge.
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Despite ongoing strengths in the job market, rising labor and energy costs are giving small-business owners a more pessimistic outlook on the economy. Here's a look at this week's economic developments and how they may affect your business.

Owner Optimism Slips

Small-business owners had a less optimistic outlook on the economy in April, citing higher labor costs and slower growth, the National Federation of Independent Business reported Tuesday.

Based on a survey of more than 1,500 owners, the Washington-based lobby's monthly small-business optimism index fell 0.5 points to 96.8, the third straight month of declines.

Three out of 10 index components declined in April, including plans to increase capital outlays, earnings trends, and expectation for the economy. Plans to increase inventories, sales expectations, job openings, and the outlook for expanding operations remained unchanged from the previous month.

Despite the downturn, more owners last month were expecting to expand employment in the months ahead, the survey found. While 26 percent reported higher labor costs, only 18 said they were passing those costs on to customers, the survey found.

"The percent raising compensation dropped from the cycle high of 30 percent reached in February, and the percent raising prices has increased, lessening the impact on profits, but not helping the inflation situation," William Dunkelberg, the group's chief economist, said in a statement.

Wholesale Sales Up

Following weak gains in recent months, sales at the nation's wholesalers rose by 1.8 percent to $364.3 billion in March, the sharpest pace in over a year, the Commerce Department said Tuesday.

Stronger sales were reported for computer and computer peripherals and supplies, lumber and construction materials, and beer, wine, and alcoholic beverages, among other goods.

At the same time, the faster sales pace was drawing down wholesale inventories, which rose by just 0.3 percent, compared to 0.4 percent the previous month, the report said. Inventories represented a 1.14 months supply at the current sales pace, down from 1.15 in February.  

Gas Prices Rising

Average gas prices across the nation this week rose by 8.3 cents to 305.4 cents per gallon, the Energy Information Administration reported Wednesday.

Gas prices were 14.5 cents above the same period last year, with increase reported in every region.

The largest increases this week were in Midwest, where prices surged by 14.9 cents to 307.4 cents per gallon, while prices in parts of California rose by 10.2 cents to a record-high of 346.1 cents per gallon, the report said.

Jobless Claims Fall

The number of new claims for unemployment benefits dropped by 9,000 to 297,000 in the week ending May 5, the Labor Department reported on Thursday.

The advance seasonally adjusted insured unemployment rate remained unchanged the previous week at 1.9 percent, with a total of 2.555 million people filing jobless claims, the report said.

The biggest declines last week were in Massachusetts, New York, and North Carolina, while the biggest increases were in Ohio, Iowa, and Nevada.

Last updated: May 10, 2007




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