Jobless claims surge as companies retrench

Nervous employers, chafing under high energy prices and uncertain about the economy’s direction and their own sales prospects, have cut jobs for six months in a row. That has left total job losses at 438,000 so far this year, the government reported earlier this month.

The unemployment rate didn’t budge at 5.5 percent in June, after zooming in May by the most in two decades. The unemployment rate is expected to climb to 6 percent or higher by early next year.

The Federal Reserve, in a fresh snapshot of business conditions released on Wednesday, said that the country is getting whammed by both slower growth and rising prices for fuel, food and other things.

Consumer spending, a major shaper of national economic activity, was reported as sluggish or slowing in many places, although the government’s tax rebates spurred sales for electronics and some other goods, the Fed reported.

One of the biggest factors influencing whether consumers will keep their pocketbooks and wallets open in the months ahead, is the state of the jobs market. If job creation and wage growth continue to falter, that could spell more trouble for the economy, analysts say.

However, faced with dueling threats — sluggish growth and higher inflation — the Fed, for now, is expected to hold a key interest rate steady at 2 percent when it meets next on Aug. 5.

Out of concern about an inflation flare-up, the Fed in June halted a nearly yearlong rate-cutting campaign aimed at shoring up the wobbly economy.

The Fed isn’t inclined to lower rates again because it will aggravate inflation. Yet, if it were to boost rates too soon to fend off inflation, that could deal a set back to the fragile economy and the already crippled housing market.

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