Economic data underscores weakening activity
WASHINGTON (Reuters) - The number of Americans filing new claims for jobless benefits rose last week and manufacturers suffered an unexpected drop in orders in June, suggesting the economy is struggling to break out of a soft patch.
The economy has lost momentum in recent months, hurt by fears of higher taxes and sharp government spending cuts next year and ongoing debt problems in Europe. Factory activity has cooled and job growth has braked sharply.
"The data evidence has been disappointing on a lot of fronts. There aren't too many bright spots," said Paul Edelstein, an economist at IHS Global Insight in Lexington, Massachusetts.
The Federal Reserve on Wednesday signaled it was willing to ease monetary policy further, noting that economic activity had slowed in the first half of the year and unemployment remains elevated. Many economists expect the Fed to launch a third round of bond buying, also known as quantitative easing, in September.
A government report on Friday is expected to show that employers added 100,000 new workers to their payrolls last month, according to a Reuters survey, up from 80,000 in June.
That would be more than the average 75,000 per month job growth in the second quarter, but far less than the average monthly rise of 226,000 in the first three months of the year.
The claims data has no bearing on the July employment report as it falls outside the survey period.
Initial claims for state unemployment benefits rose 8,000 to a seasonally adjusted 365,000, the Labor Department said on Thursday, less than economists' expectations for an increase to 370,000.
The smaller gain likely reflected seasonal distortions from the temporary plant shutdowns by automakers for annual retooling, which cause wide swings in claims data in July.
The model used by the government to smooth the numbers for typical seasonal patterns has trouble anticipating the timing of the temporary closures and in addition, some automakers kept production lines running in July.
"We would prefer to take the July data with a grain of salt and wait for a few more weeks to get a better sense of the underlying trend in the number of new filers," said Guy Berger, an economist at RBS in Stamford, Connecticut.
A Labor Department official said last week was the last where the seasonal expectation was shaped by seasonal layoffs in the auto manufacturing sector.
The four-week moving average for new claims, a better measure of labor market trends, fell 2,750 to 365,500, the lowest in four months.
FACTORIES LOSE STEAM
Underscoring the weakness in the economy, factory orders fell 0.5 percent in June after rising by the same margin the prior month as demand for a range of items such as motor vehicles, machinery and computers sagged.
The rise was in line with economist forecasts. The Commerce Department report was the latest sign of weakening activity in the factory sector.
On Wednesday, the private Institute for Supply Management said manufacturing activity contracted in July for the second straight month.
U.S. financial markets were little moved by the data. Stocks on Wall Street fell as European Central Bank President Mario Draghi disappointed investors hoping for quick action to contain the euro zone debt crisis.
U.S. Treasury debt prices rose and the dollar advanced against a basket of currencies.
While a third report showed planned layoffs at U.S. companies dropped for a second straight month in July, even as job cuts in the financial sector persisted, analysts warned this could be temporary given that layoffs typically slow during the summer.
Employers announced 36,855 planned job cuts last month, down 1.9 percent from June, consultants Challenger, Gray & Christmas said. So far this year, announced layoffs are up 2.5 percent from the same period in 2011.
The financial sector cut 6,156 jobs in July, the largest number since January.
"This may simply be the lull before the storm," said John Challenger, chief executive of the company. "The situation in Europe is far from being resolved and ongoing weakness here could continue to take a toll on the financial sector."