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This Week's Economic Roundup

Observers predict potential labor shortage; prices at the pump fall for second straight week.
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Small-business owners are hiring more workers and paying higher wages, while manufacturers are starting to receive fewer new orders. Here's a look at this week's economic developments and how they may affect your business.

Payrolls, Wages Up

Small-business payrolls and wages grew at roughly the same pace in May, drawing concerns of a labor shortage ahead, SurePayroll reported Tuesday.

Hiring at small businesses was up 0.32 percent last month, the sixth straight month of gains and setting a pace for a year-end increase in total small-business employment of 4.5 percent, the Chicago-based payroll services firm reported. By contrast, small-business hiring shrank by 0.2 percent in 2006.

At the same time, average annual salaries paid by small employers rose by 0.3 percent in May to $32,142, an $850 increase since January, the report said. Both payrolls and salaries were up in every region, the report said.

Rising salaries could indicate a growing shortage of quality workers in the labor market, according to SurePayroll president Michael Alter. While higher salaries tend to boost consumer spending, they can also be a burden on smaller employers, Alter said.

CEO Optimism Falls

The nation's business leaders were less optimistic about the economy in the second quarter, prompting many to curb spending plans, according to Business Roundtable, a Washington-based group of chief executives.

Based on a survey of 100 CEOs nationwide, the group's quarterly economic outlook index dropped by three points from the opening quarter to 81.9. Readings above 50 indicate expansion. The index has ranged between 50 and 70 since late 2002, reaching an all-time high of 104.5 in early 2005.

Sixty-six percent of respondents said they expected sales to increase over the next six months, compared to 33 percent that anticipated no change or declines. Fewer businesses also reported changes in capital spending and hiring plans.

On average, respondents said they expected the economy to expand by 2.6 percent this year.

Orders, Productivity Down

Weaker demand for cars, computers, and other goods slowed the pace of new factory orders in April, the Commerce Department reported Monday.

New orders for all manufactured goods rose by just 0.3 percent, compared to an increase of 4.1 percent in March, the report said.

Durable goods orders fell by 0.8 percent after increasing by 5.1 percent in March, while orders of non-durable goods rose by just 0.2 percent.

Both shipments and inventories of durable goods held steady in April, while shipments of non-durable goods edged down by 0.2 percent and inventories increased by 0.5 percent, the report said.

Worker productivity over the first quarter also grew slower than expected, according to revised figures from the Labor Department released Wednesday.

Productivity, which is measured by output per hour for all workers, rose by just 1 percent from January to March, down from 1.7 percent reported last month. Gains in first quarter labor costs were also revised up, from 0.6 percent to 1.8 percent, the report said.

Gas Prices Ease

Average retail gas prices fell by 5.2 cents to $3.157 per gallon in the week of June 4, the second straight week of declines, the Energy Information Administration reported Wednesday.

Cheaper prices were reported in every region, including a 9.5 cent decrease in the Midwest to $3.22.5 per gallon, the sharpest decline nationwide.

Despite the declines, average gas prices were 26.5 cents higher than at the same time last year, the report said.

Jobless Claims Fall

The number of new claims for unemployment benefits fell by 1,000 to 309,000 in the week ending June 2, the Labor Department reported Thursday.

The advance insured unemployment rate the previous week was unchanged at 1.9 percent, with roughly 2.535 million people filing for benefits.

The largest decreases last week were in North Carolina, Missouri, and Georgia, while the largest increases were in Texas, Michigan, and New York.




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