* Factory index unexpectedly gains to nearly 2-year high
* New orders strongest since May 2010, hiring gauge rises
* New claims for jobless benefits hit 5-year low
* Leading economic index rises 0.5 percent in December
By Jason Lange
WASHINGTON, Jan 24 U.S. factory activity grew
the most in nearly two years in January and the number of new
claims for jobless benefits dropped to a five-year low last
week, giving surprisingly strong signals on the economy's pulse.
Financial information firm Markit on Thursday said its
preliminary Purchasing Managers Index for manufacturing rose to
56.1 this month, its best showing since March 2011. A reading
above 50 indicates expansion.
A separate report from the Labor Department showed initial
claims for state unemployment benefits fell by 5,000 to 330,000,
the lowest since January 2008 when the 2007-2009 recession had
Together, the data suggest the economy entered the new year
with some underlying momentum despite an ongoing political
battle in Washington over fiscal policy.
"The economy is structurally doing a little bit better,"
said Michael Strauss, an economist at Commonfund in Wilton,
Analysts polled by Reuters had expected Markit's "flash"
factory gauge to slip and looked for claims to rise to 355,000.
The unexpectedly strong U.S. data helped U.S. stocks to
rise, reversing early declines caused by disappointing revenues
reported by Apple Inc. Better-than-expected
economic news from the euro zone and China also supported
Economists have cautioned about reading too deeply into this
month's figures on jobless claims, which tend to be volatile
around this time of the year because of large swings in the
model the government uses to iron out seasonal fluctuations.
Still, claims have fallen for two straight weeks, suggesting
employers do not yet see tax hikes enacted this month as a big
threat to consumer demand.
A four-week moving average for new claims, meant to provide
a better sense of underlying trends, fell 8,250 to 351,750, the
lowest since March 2008.
The data helped the dollar extend gains versus the yen
, while U.S. Treasury debt prices fell.
Claims are now at roughly the same level they were in much
of 2006 and 2007. They started trending higher around December
2007, the month the recession began.
However, while employers have pulled back on layoffs, they
have only added jobs at a lackluster pace.
Analysts polled by Reuters expect the government's
employment report due on Feb. 1 will show 165,000 jobs were
added to payrolls this month, up from 155,000 new positions in
December. The unemployment rate is expected to hold steady at
Like the claims data, Markit's factory report also offered
support for the idea that the labor market recovery was gaining
traction with new jobs in the sector being created at the
fastest pace in nine months.
A Markit subindex showed factory output grew at its fastest
pace since March 2012, while new orders also rose. The new
orders gauge hit 57.7, its highest level since May 2010.
Improved economic conditions in China and some parts of
Europe helped boost orders from abroad, but firms largely tied
the growth surge to higher demand from U.S. customers.
"It is the domestic market that is clearly providing the
main impetus to the upturn," said Markit chief economist Chris
Aggressive monetary stimulus from the Federal Reserve and a
last-minute deal by Congress to reduce the size of the tax hike
gave a boost to business confidence, Williamson said.
A third gauge of economic health released on Thursday also
beat analysts' forecasts. The private Conference Board's Leading
Economic Index gained 0.5 percent to 93.9 last month, pointing
to an improvement in growth.