NO increase in Jobs or Profits - But GDP grew 3.1% per Reuters

[papau]

http://www.nytimes.com/reuters/news/news-economy.html

August 28, 2003
Defense Spending Drives Economy
By REUTERS



Filed at 11:12 a.m. ET
WASHINGTON (Reuters) - Soaring defense spending is driving the U.S. economy, but not doing too much for the unemployment picture as Americans still struggled to find jobs and corporations saw their profits fall, government reports on Thursday showed.

The Commerce Department said the economy grew at a revised 3.1 percent pace in the second three months of 2003, boosted by defense spending, business investment and consumers.<snip>

But in a separate report, the Labor Department said the number of Americans lining up to claim jobless benefits in the Aug. 23 week rose to 394,000 from 391,000 the prior week. Although the number was below 400,000, a level considered a sign of a soft labor market, analysts said the claims numbers were disappointing.

In a separate report the Commerce Department also estimated after-tax corporate profits were down by 3.4 percent for the second quarter.The dollar strengthened slightly in reaction to the good growth number, but Treasury bonds also rose because of the rise in jobless claims.<Snip>


Within the gross domestic product report, government spending on defense -- much of it to pay for the U.S.-led war in Iraq -- soared 45.9 percent, the strongest gain since the third quarter of 1951, during the Korean War.

<snip>"Most of the data coming in this month have been strong but still no jobs," said William Cheney, chief economist at John Hancock Financial Services."That's the wildcard for the economic outlook."

Analysts and policy makers will be watching the Labor Department's monthly payroll data report, due to be released next Friday, for more details on the jobs market.Wall Street is expecting non-farm payrolls to have added a scant 10,000 jobs in August after shedding 44,000 in July. This would mark the first rise since January.