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This Week's Economic Roundup

Business owners report strong growth and hiring plans; gas prices drop to five-month low.
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Despite rising labor costs and lower productivity, small-business owners are feeling good about the economy and plan to staff up in the months ahead. Here's a look at this week's economic developments and how they may affect your business.

Owner Confidence Up

Small-business owners in the second quarter reported growth on track or better than forecast at the beginning of the year, Administaff reported Tuesday.

In a quarterly survey of its 5,800 small and midsize business clients, 59 percent said they were meeting their initial projections this year, while 23 percent said they exceeding those projections, the Houston-based employment services firm said.

More than half said they were hiring additional full- or part-time staff. An analysis of payroll date showed that compensation costs were up 6.4 percent from the same period last year.

Labor Costs Rising

Labor costs for all non-farm businesses over the second quarter outpaced productivity growth, marking the sharpest year-on-year increase in seven years, the Labor Department reported Tuesday.

While second-quarter productivity rose 1.8 percent, labor costs climbed by 2.1. Hourly compensation rose 3.9 percent, roughly unchanged from the previous quarter.

In the past year, productivity growth has grown by just 0.6 percent, compared to a 4.5 percent increase in labor costs -- the highest gains since the third quarter of 1999, when they grew by 5 percent.

Wholesale Inventories Down

Sales at the nation's wholesale merchants rose by 0.6 percent in June to $359.5 billion, paring inventories down to a record low, the Commerce Department reported Wednesday.

By contrast, inventories rose by 0.5 percent, leaving only enough stock for just over a month at the current sales pace.

June sales of durable goods rose by 0.7 percent, led by computer equipment and hardware, while non-durable goods rose by 0.5 percent.

Gas Prices Falling

For the third week in row, average gas prices continued to decline, hitting a five-month low, the Energy Information Administration reported Wednesday.

As of Aug. 6, average gas prices were down 3.8 cents from the previous week to $2.838 per gallon, with declines reported in every region. Prices are now 20 cents below the same period last year.

The lowest prices were in the Gulf Coast region, where prices dropped 4.4 cents to $2.748 per gallon. Meanwhile, prices in California continued to hover above the $3 mark, despite falling by 4.4 cents.

Jobless Claims Surge

The number of new claims for unemployment benefits rose by 7,000 last week to 316,000, the highest level since June, the Labor Department reported Thursday.

The insured unemployment rate for the previous week remained unchanged at 1.9 percent, with a total of 2.559 million people nationwide filing claims, the report said.

The biggest gains last week were in Wisconsin, California, and Iowa, while the biggest declines were in Michigan, Illinois, and Puerto Rico. 

Last updated: Aug 9, 2007




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