* New U.S. jobless claims rise 78,000 in latest week
* Philadelphia Fed factory index shows November contraction
* Superstorm fueled higher claims, weaker factory activity
By Jason Lange
WASHINGTON, Nov 15 Superstorm Sandy drove a
surge in new claims for U.S. jobless benefits last week and hurt
factory activity in the mid-Atlantic region in November, signs
it could deal a substantial blow to economic growth in the
Initial claims for state unemployment benefits rose 78,000
to a seasonally adjusted 439,000, the highest level since April
2011, the Labor Department said on Thursday.
It was the biggest one-week jump since a spike caused by
Hurricane Katrina in September 2005.
Because the storm's impact is expected to be temporary, the
data gave few clues as to the underlying health of the U.S.
economy. But it appears the short-term hit could be greater than
economists previously thought.
"We will likely see a step back in job growth," said Ryan
Sweet, senior economist at Moody's Analytics in West Chester,
Pennsylvania. The U.S. jobs market has had a painfully slow
recovery from the 2007-09 recession and the unemployment rate
remains stuck near 8 percent.
The muddy economic picture left by the storm could make it
difficult to gauge the economy's fundamental strength for
several more weeks.
In addition to the storm, the economic recovery is laboring
against the uncertainty over the path of U.S. budget policy.
U.S. economic growth is expected to slow sharply in the
fourth quarter as businesses and consumers hold back on
purchases due to fears of the so-called fiscal cliff, a Reuters
poll showed on Thursday.
Absent action by lawmakers, Washington will slash the
federal budget gap by roughly $600 billion next year with sharp
spending cuts and big tax hikes that would likely push the
economy back into recession. Europe's debt crisis is also
weighing on U.S. growth.
Economists expect U.S. job growth to slow to an average
144,000 jobs per month over the final three months of the year
from 174,000 in the third quarter.
Fiscal cliff fears and disappointing results from Wal-Mart
Stores Inc pushed U.S. stocks down in choppy trade,
while prices for U.S. government debt rose.
FACTORIES TAKE A HIT
An analyst from the Labor Department said several states
from the mid-Atlantic and Northeast reported large increases in
new filings for unemployment benefits last week due to Sandy, a
mammoth storm that slammed into the East Coast in late October.
The storm left millions of homes and businesses without
electricity, shut down public transportation and caused
widespread damage in coastal communities.
Economists have said the storm could shave as much as half a
percentage point from economic growth in the last three months
of the year, but that should be made up early in 2013.
Retail sales data on Wednesday pointed to a softening in
U.S. consumer spending early in the fourth quarter as Sandy
slammed the brakes on automobile purchases last month.
Wal-Mart, the world's biggest retailer, reported quarterly
sales below analysts' expectations, but said it was
well-positioned for U.S. holiday sales.
"Current macroeconomic conditions continue to pressure our
customers," Chief Financial Officer Charles Holley said. "The
holiday season is predicted to be very competitive, but we are
very well prepared to deliver on the value and low prices our
Separately, data from the Philadelphia Federal Reserve Bank
showed manufacturing in the mid-Atlantic unexpectedly contracted
this month. The Philadelphia Fed's business activity index
slumped to -10.7 from 5.7 the month before.
Any reading below zero indicates a decline in the region's
manufacturing. The storm led firms in the region to reduce
activity by about two days on average, the Philadelphia Fed
In New York state, which was also hit hard by Sandy, a gauge
of manufacturing from the New York Federal Reserve Bank pointed
to a fourth straight month of contraction in November.
The Labor Department said in another report that the
Consumer Price Index edged up just 0.1 percent last month, with
a rise in shelter costs offsetting a drop in gasoline prices.
A reading of so-called core prices, which strips out
volatile food and energy costs, rose a trend-like 0.2 percent.
The data showed a generally stable rate of inflation, which
economists said should give the Federal Reserve room to continue
efforts to bolster the recovery.
"I wouldn't say that core CPI is worrying at all," said
David Sloan, an economist at 4Cast in New York.
The price of shelter, which includes rent, rose 0.3 percent
during the month, the most since 2008, and accounted for more
than half of the increase in the CPI. Rents for primary
residences rose 0.4 percent, which could suggest a strengthening
in the economy is giving landlords more leverage to raise rents.
Gasoline prices fell 0.6 percent in October after climbing 7
percent the prior month. It was the first drop in gasoline
prices since June. Higher costs at the pump have forced many
American consumers to cut back on other spending.
In the 12 months to October consumer prices increased 2.2
percent, up a tenth of a point from September's reading. Core
prices were up 2 percent, matching the 12-month reading from