(March 12) - Faint but welcome signs of optimism emerged Thursday from the most troubled corners of the economy — the banking system, the automakers and cash-desperate stores — and helped push the stock market to its best three-day run in four months.
General Motors, weathering the worst auto sales slump in a generation, said it had told the Obama administration that it would not need a $2 billion government loan for this month after all because its cost-cutting plan was taking hold.
Bank of America CEO Kenneth Lewis said he did not expect his company to need additional financial help from the government. While banks are under pressure, he said, they are not in "nearly as dire shape as some would have us believe."
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And the government reported that retail sales, excluding autos, fell just 0.1 percent in February, far less than analysts were expecting. The Commerce Department also revised January's figures to a gain of 1.8 percent, the best in three years.
The combination drove the Dow Jones industrial average up nearly 240 to 7,170, its first close over 7,000 this month. The Dow has gained 623 points since Tuesday, its best winning streak since Thanksgiving.
But there was fresh evidence, too, that the economy is far from turning a corner. More unemployed Americans are chasing a dwindling supply of jobs, pushing the number receiving jobless benefits to record heights with no relief in sight.
That total has hit 5.3 million, the Labor Department said, the most since records began in 1967. An additional 1.4 million people are receiving up to 33 weeks of extended unemployment aid, beyond the 26 weeks states typically provide.
By the end of April, more than a half-million of those recipients are likely to exhaust their extended benefits, according to the National Employment Law Project, an advocacy group, and that could raise pressure on Congress, which approved the extension of benefits last year, to extend benefits again.
"They will realize it is not realistic for these people to get back into employment in a labor market that is deteriorating very sharply," said Nigel Gault, chief U.S. economist for IHS Global Insight, a consulting firm.
The Federal Reserve also said the net worth of American households fell by a record amount in last year's fourth quarter. Household net worth dropped by 9 percent from the third quarter, the most since records began 50 years ago.
Most analysts don't expect a sustained rebound anytime soon. But some saw the retail report as a sign that consumer spending might be stabilizing after falling sharply in the last three months of 2008.
Consumer spending is closely watched because it accounts for 70 percent of gross domestic product, the broadest measure of the economy's health.
"The retail sales figures were encouraging, but the coast is not clear," said Mark Zandi, chief economist at Moody's Economy.com. "As long as we are losing more than 600,000 jobs per month, consumers are not going to be able to sustain this kind of spending."
Meanwhile, General Motors Chief Financial Officer Ray Young told The Associated Press the company wouldn't need the $2 billion in federal help right away because its restructuring was starting to take hold.
"The cash burn that we thought we were going to have in January and February is not as high. Clearly we still have a cash burn," he said.
The upbeat assessment of Bank of America's condition came days after Citigroup surprised Wall Street by reporting it had run at a profit in January and February. JPMorgan Chase made a similar announcement.
Another stalwart of the economy, General Electric, received a credit rating cut that was tamer than anticipated. Many investors had expected deeper cuts for GE.
But the labor market remains grim. Unemployment rose to 8.1 percent in February, and some economists think it could reach 10 percent by the end of the year.
In its report Thursday, the Labor Department said first-time requests for unemployment insurance rose to 654,000. It also revised the previous week higher, to 645,000.
The four-week average of new claims, which evens out fluctuations, rose to 650,000, highest in more than 26 years — although the work force has grown by about half since then.
Hundreds of thousands of Americans who started receiving federal emergency unemployment help in November will begin using up their benefits in April, said Maurice Ensellem, policy co-director at the National Employment Law Project.
The new federal stimulus package makes it easier for states with high unemployment to add up to 20 additional weeks of benefits on the federal dime, but 14 states would have to make legislative changes to get the money, he said. The change could help 316,000 people.
The long-term unemployed face other challenges, too, economists said. Their skills could deteriorate after long spells out of work, for example, making it harder for them to find work even after the economy rebounds.
The United States could "end up with a permanently higher unemployment rate" even in a healthier economy, Gault said.
More job cuts were announced this week. Computer maker Dell said it's laying off workers around the world but would not say where or how many. American Airlines said it will lay off 323 flight attendants on April 1.
AP Economics Writer Martin Crutsinger contributed to this report.
