WRAPUP 4-Factory, jobs data offer hope for U.S. economy

Thu Oct 20, 2011 2:33pm EDT

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* Mid-Atlantic factory activity rebounds in October
    * Initial jobless claims fall 6,000 last week
    * Existing home sales fall 3 percent in September
    * Data consistent with slow growth but not recession

    By Lucia Mutikani
    WASHINGTON, Oct 20 (Reuters) - Factory activity in the U.S.
Mid-Atlantic region rebounded in October and the number of
Americans claiming new jobless benefits fell last week in fresh
signs that the economy was likely to duck a new recession.
    Optimism over the economy was tempered, however, by other
data on Thursday showing a drop in sales of previously owned
homes and only a small rise in a gauge of future growth.
    "The numbers we have seen today provide some hints that the
domestic economy is doing a little bit better, even with the
challenges that are unfolding in Europe," said Michael Strauss,
chief economist at Commonfund in Wilton, Connecticut.
    Initial claims for state unemployment benefits slipped
6,000 to 403,000 last week, the Labor Department said. A
four-week average, which smooths out weekly volatility to give
a better view of trends, hit its lowest level since April.
    Separately, the Philadelphia Federal Reserve Bank's
business activity index rebounded to 8.7 in October, the
highest reading in six months, from minus 17.5 in September.
    A reading above zero indicates factory activity is
expanding in the region, which covers eastern Pennsylvania,
southern New Jersey and Delaware.
    U.S. stocks initially rose on the data, but
surrendered most gains on nagging doubts over whether European
leaders would decisively deal with the euro zone debt crisis at
a summit this weekend. Prices for U.S. Treasury debt were little changed while the dollar was a touch
weaker against a basket of currencies .
    Fears had been mounting that the sickly U.S. economy was
heading back toward recession after growth wobbled in the first
half of the year and after consumer confidence plunged in
August amid signs both the United States and Europe were having
trouble coming to terms with their huge debts.
    But the recent stream of data, including figures on retail
sales and trade, suggest output sped up in the third quarter.
    Analysts estimate U.S. gross domestic product grew at an
annual pace of anywhere between 2.3 and 2.7 percent, a sharp
step up from the second quarter's tepid 1.3 percent rate.
    "There is little evidence the economy is ready to enter a
downturn based on the Philadelphia Fed (data)," said Joseph
LaVorgna, chief U.S. economist at Deutsche Bank in New York.JOBS MARKET TONE IMPROVING
    That view was also underscored by the four-week moving
average of initial jobless claims. The claims data covered the
survey week for the government's closely watched nonfarm
payrolls count for October.
    Initial claims dropped 25,000 between the September and
October survey periods, suggesting a step-up in nonfarm
employment after payrolls increased 103,000 last month.
    After spiking in mid-September, jobless claims appear to
have settled near the 400,000 mark that is usually associated
with some improvement in the jobs market.
    Weak unemployment is a thorny issue for the Federal
Reserve, which is weighing further options to boost output and
lower the jobless rate after slashing interest rates to near
zero and pumping about $2.3 trillion into the economy.
    On Thursday, St. Louis Fed President James Bullard
acknowledged the improved tone in economic data but his
counterpart at the Cleveland Fed, Sandra Pianalto, did not
believe growth would pick up soon.
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