Economic Outlook: When spending stops

NEW YORK, June 5 (UPI) -- Analysts expect another bump in the U.S. unemployment rate to be announced Friday, possibly jumping to 9.2 percent.

Weekly first-time claims for unemployment benefits have looked mildly positive three weeks in a row, but Auto Data Processing Inc. Wednesday estimated 532,000 non-farm jobs had been lost between April and May with 108,000 construction jobs, 149,000 manufacturing jobs and 265,000 service jobs erased in the month.

General Motors Corp. added to the pessimistic outlook with its bankruptcy filing Monday and plans to eliminate 21,000 jobs, not counting those who work in the thousands of dealerships it expects to close, advertising workers who will have less to do or parts suppliers with diminished prospects.

Wal-Mart said this week it would add 22,000 jobs by opening up to 157 new U.S. stores in 2009. But even Wal-Mart cannot do more than plug one hole in the dike.

There are signs other corporations are ready to step up to the plate. United Airlines said it was planning a major purchase of new jets that showed a tentative comeback in corporate investment, The Washington Post reported Friday.

In an era of sharp declines in corporate spending, "there are now a few inquiries and indications of demand and applications for borrowing," Kenneth Bentsen Jr., president of the Equipment Leasing and Finance Association told the Post.

Where has spending gone? The U.S. Commerce Department said spending on commercial facilities dropped at an annual rate of 36.9 percent in the first quarter, while spending on machinery and software dropped 33.5 percent. Corporate spending on transportation dropped to its lowest level in almost 40 years, Commerce said.

That meant, essentially, that long-term bets have been off the table, a telling pronouncement given corporations prefer investors commit to long-term bets on their companies.

United is bucking the trend with a plan to buy 150 new planes at a cost of about $10 billion, the Post said. Richard Aboulafia at consulting firm Teal Group said United was willing to "strike now while they can get a good price," but is taking a chance on "growing air traffic in the future."

Looking to end the week on a positive note, stock markets turned higher in Asia and Europe Friday. The Nikkei 225 average in Japan gained 1.02 percent. The Hang Seng index in Hong Kong rose 0.96 percent, adding 176.76 points. The Singapore Straits Times gained 1.42 percent, while the S&P/ASX in Australia rose 0.93 percent.

In midday trading, the DJStoxx 600 gained 0.73 percent, while the FTSE 100 in Britain rose 1.61 percent, adding 68.51 points. The DAX 30 in Germany rose 0.54 percent. The CAC 40 in France gained 1.06 percent.