U.S. recovery hobbled by jobs, housing

Data released Thursday showed the economic recovery continues to struggle in the U.S., signaling growing weakness in the job market and ongoing problems in the housing market.

Fewer people bought new homes in May, the Commerce Department said.

It was the latest sign that the struggling housing market won't rebound this year.

New home sales fell 2.1 per cent to a seasonally adjusted annual rate of 319,000 homes. That's far below the 700,000 homes per year that economists say must be sold to sustain a healthy housing market.

The median sales price rose 2.6 per cent from April to $222,600 US. That's more than 30 per cent higher than the median sales of price of older, re-sale homes.

Jobless claims rise

At the same time, the number of Americans applying for unemployment benefits last week rose by the most in a month, the Labour Department reported.

Applications rose by 9,000 to a seasonally adjusted 429,000, the second increase in three weeks and the 11th straight week that applications have been above 400,000.

The four-week average for unemployment benefit applications, a less volatile measure, was unchanged at 426,250 last week.

Analysts said the June trend in unemployment applications was consistent with modest payroll growth of around 130,000 per month.

The economy needs to generate at least 125,000 jobs per month just to keep up with population growth. And at least twice that many jobs are needed to bring down the unemployment rate, which rose to 9.1 per cent in May.

The Federal Reserve acknowledged on Wednesday that the economy has slowed  in recent months. Fed officials also said in a statement summing up their two-day meeting that "recent labor market indicators have been weaker than anticipated."

More hiring is critical to boosting the economic growth. It leads to greater consumer spending, which accounts for 70 per cent of total economic activity. Consumer spending slowed to a 2.2 per cent growth rate in the first three months of this year. The weakness reflected the rise in gas prices.