Economy trudges along despite Europe turbulence
WASHINGTON (Reuters) - The number of Americans filing new claims for jobless benefits dipped last week, indicating the economy is plodding along even though headwinds from Europe cut into U.S. factory activity growth this month.
The data on the U.S. economy on Thursday was a bit lackluster, but it showed the recovery remained resilient even with growth in China slowing and the euro zone edging toward recession.
"We are growing at a moderate pace of 2 to 2-1/4 percent, but we have some headwinds that are starting to assert themselves, particularly coming from Europe," said Paul Edelstein, an economist at IHS Global Insight in Lexington, Massachusetts.
Initial claims for state unemployment benefits slipped by 2,000 to a seasonally adjusted 370,000, the Labor Department said. The four-week moving average, considered a better measure of labor market trends, also fell to 370,000, dropping by 5,500.
Although claims have been little changed in the past four weeks, they remain below levels hit in mid-April. That suggests some improvement in the pace of job creation this month after April's disappointing 115,000 gain in nonfarm payrolls.
Europe's festering debt problems and a cooler pace of activity in China have started to hurt American factories.
In a separate report, U.S. manufacturing growth tapered off in May, according to financial information services firm Markit. Its U.S. "flash" manufacturing Purchasing Managers Index fell to a reading of 53.9 this month, a three-month low, from 56.0 in April.
Any reading above 50 indicates expansion; the data showed the factory sector has enjoyed a 32-month growth streak.
Markit chief economist Chris Williamson attributed the moderation in activity to a softening in exports due to the deteriorating economic situation in Europe and the Chinese slowdown.
Several European countries, including Britain and Spain, have already tumbled into recession, while recent economic indicators have shown that China's days of consistent double-digit growth have come to an end.
A third report from the Commerce Department showed new orders for durable goods rose 0.2 percent in April after dropping 3.7 percent in March.
Orders for durable goods, which are designed to last at least three years and range from toasters to aircraft, were lifted by demand for transportation equipment.
But orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, fell 1.9 percent in April after dropping 2.2 percent in March.
The durable goods report, however, is notoriously volatile, and the non-defense capital goods category tends to fall in the first month of each quarter.
"The good news is that weaker global growth is not yet leading to a collapse in durable goods orders in the United States," said Scott Anderson, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. "On a relative basis, U.S. durable orders are holding up fairly well, considering the substantial headwinds."
Some retailers are feeling the pinch from slowing global demand. High-end jeweler Tiffany & Co on Thursday cut its forecast for both sales and profits for its current fiscal year ending in January 2013, blaming cooling growth in key markets like China.
But retailers like warehouse club operator Costco Wholesale Corp, which reported an 8 percent rise in quarterly sales on Thursday, have notched gains as budget conscious Americans seek to save money on groceries.
Most U.S. stocks ended higher on Thursday, while government bond prices drifted lower. The dollar rose against a basket of currencies.
Though jobless claims have barely budged over recent weeks, they have offered no signs that the labor market is worsening.
The number of people still receiving benefits under regular state programs after an initial week of aid fell by 29,000 to 3.26 million in the week ended May 12.
This so-called continuing claims data covered the week for the household survey from which the U.S. unemployment rate is derived. The jobless rate dropped to 8.1 percent in April from 8.2 percent in March, mostly because more people gave up the hunt for work.
"Labor market growth remains positive. We expect the unemployment rate to remain unchanged at 8.1 percent," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank in New York.
The government releases its May employment report on June 1.