Washington : A slowdown in US business investment may soon hit the job market, further hindering a recovery in the world's largest economy.
Capital spending, one of the few bright spots in the recovery, declined in July, according to Commerce Department figures released on Wednesday in Washington. Sales of new homes fell to the lowest level since data began in 1963, another report from the same agency showed, indicating a lack of jobs is crippling housing.
Employers are reluctant to take on more staff until they see more evidence of durable growth, keeping unemployment near a 26-year high and holding back the consumer spending that makes up 70 per cent of the economy.
Private payrolls
A Labour Department report next week may show that private payrolls failed to grow in August for the first time in eight months, said Michael Feroli, chief US economist at JPMorgan Chase & Co in New York.
"If capital spending does weaken further, then that raises some concerns about labour demand and whether firms want to increase hires,"" said Feroli, who reckons the odds of a recession have increased in the past two weeks to about one-in- three. A decline in private payrolls "would raise some concern about whether the recovery is proceeding or not. If you see a couple of months of decline you'd be more confident that we actually were in a recession."
Applications for unemployment benefits dropped to 490,000 last week from 500,000, the highest level since November, according to the median estimate of 48 economists surveyed by Bloomberg News ahead of a report from the Labour Department in Washington. Projections ranged from 475,000 to 510,000.
