WASHINGTON - The economy is showing signs of modest improvement - not enough to reduce high unemployment but enough to ease fears that another recession might be near.
Fewer people applied for unemployment benefits last week, though some of that resulted from technical factors. And the economy grew slightly more in the April-June quarter than previously estimated. Growth is also expected to tick up in coming months.
Investors drew some hope from the latest data, as well as from news that Germany’s government approved a plan to bolster Europe’s response to its debt crisis. The Dow Jones industrial average ended up 143 points, or 1.3 percent, after a day of volatile trading.
Some of the news yesterday was not encouraging. Chief executives of the nation’s largest companies were more pessimistic than they were just three months ago, according to a survey by the Business Roundtable, a trade group.
Only about one-third of the CEOs said they planned to hire or boost spending in the next six months. That’s down from about half who said so in June.
And fewer Americans signed contracts to buy homes in August, the second straight month of declines.
The economy expanded at an annual rate of 1.3 percent in the April-June quarter, up from an estimate of 1 percent a month ago, the Commerce Department said. The improvement reflected modestly higher consumer spending and a bigger boost from trade.
Even so, the economy grew at an annual rate of just 0.9 percent in the first six months of the year. That’s the weakest six-month performance since the recession ended more than two years ago.
Many Americans have been spending less in order to reduce debt. That trend is likely to hold back the economy in the months ahead.
Weak consumer spending, high unemployment and financial market turmoil could slow growth for the rest of this year.
Most economists don’t expect another recession. But they do not see growth accelerating much. Many foresee a rebound to between 2 percent and 2.5 percent growth this quarter.
A forecasting panel for the National Association for Business Economics predicts growth this year will be just 1.7 percent.
Many economists expect similarly tepid growth in 2012 and 2013. The economy would need to grow consistently at 4 percent to 5 percent to generate enough hiring to lower unemployment significantly.
“Growth remains sluggish and insufficient to reduce the unemployment rate,’’ said Ryan Sweet, an economist at Moody’s Analytics.
The unemployment rate was stuck at 9.1 percent in August for the second straight month. Employers did not add any jobs in August - the weakest showing in nearly a year.
Economists expect little if any improvement in hiring for September. Sweet believes employers will have added 50,000 jobs this month. More than twice as many jobs would be needed just to keep up with population growth.
Others are gloomier. Capital Economics predicts that the economy in September will have failed for a second straight month to create any jobs. The main problem, the firm says, is that businesses don’t think their customer demand justifies additional workers.
Though growth has probably strengthened a bit in the July-September quarter, the economy suffered shocks that will restrain growth in the final quarter of this year, economists say.
In early August, for example, Congress fought to the final hours before raising the nation’s borrowing limit. That delay, in part, led to a downgrade of long-term US debt by Standard & Poor’s. Stocks tumbled in response.
In addition, consumer confidence plunged last month to its lowest level since April 2009, when the economy was officially in recession.