Article by AlgosysFx
The number of Americans filing new claims for jobless benefits fell last week to a near four-year low, but an unusual pattern for summer factory shutdowns kept hopes in check that the weak labor market was improving. Other data on Thursday showed new orders for long-lasting US manufactured goods rose in June. Nonetheless, a gauge of planned business spending dropped, pointing to a slowdown in factory activity. Economists said the two economic reports did little to change the view that the economy was stuck in a rough patch.
Meanwhile, a third report showed contracts to buy previously owned US homes unexpectedly fell in June, which is a worrisome sign for the housing market. The labor market has suffered three months of sub-100,000 job growth as the economy suffered from fears over Europe’s debt crisis and a planned belt tightening by the US government.
Last week, initial claims for state unemployment benefits dropped 35,000 to a seasonally adjusted 353,000, which was near a four-year low touched earlier this month. That was a much sharper drop than economists expected. The reading for jobless claims has been volatile this month because of the timing of the annual auto plant shutdowns for retooling. One measure that tries to smooth out this volatility, the four-week moving average, fell 8,750 last week to 367,250.
The good news there is that on average over the last four weeks, the number is improving. This year, automakers are carrying out fewer temporary plant shutdowns, throwing off the model the department uses to smooth the data for typical seasonal patterns. US stocks rose sharply after remarks by Europe’s central bank chief about protecting the Euro Zone from collapse helped reassure a market already expecting the US Federal Reserve to step up stimulus efforts. Yields on government debt also
rose.
Fed Chairman Ben Bernanke told lawmakers last week that the US central bank, which last month expanded its efforts to spur the economy, would take additional action if officials concluded no progress was being made towards higher levels of employment. Little action, if any, is expected at the Fed’s policy review next Tuesday and Wednesday, although some economists think the Fed could tell investors it will keep interest rates low for even longer than currently pledged.
The government is expected to report that the economy grew at a 1.5 percent annual rate in Q2, slowing from the 1.9 percent rate in the prior three months. Housing has been a relative bright spot in the US economy this year, but the National Association of Realtors said its Pending Home Sales Index, based on contracts signed in June, slipped 1.4 percent during the month.
Economists have been optimistic that the housing sector, which collapsed during the 2007-2009 recession, was showing signs of life, as prices have appeared to stabilize. Thursday’s report, however, appeared to dampen some of that optimism. Hence, another clear sign that a bottom may be close, but has not yet been found in housing.
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