(Corrects to show jobless claims at lowest level since May, not
* U.S. jobless claims at 334,000, lowest since May
* Mid-Atlantic factory activity rises to two-year high
* Data hints at economic pick-up after sluggish first half
By Jason Lange
WASHINGTON, July 18 New claims for U.S. jobless
benefits fell last week and factory activity picked up in the
Mid-Atlantic region in early July, signs of a stronger economy
that could help push the Federal Reserve to ease its monetary
Thursday's data bolsters the view that economic growth could
pick up after a dismal first half of the year in which consumers
were smacked by tax hikes and deep cuts in the federal budget.
"This is an encouraging sign heading into the second half of
the year," said Ryan Sweet, senior economist at Moody's
Analytics in West Chester, Pennsylvania.
Fed Chairman Ben Bernanke expects the economy will gather
enough steam by the end of the year for the Fed to begin scaling
back a bond-purchase program it has used to push down borrowing
costs, and Thursday's data appeared to support his case.
The Philadelphia Federal Reserve Bank said factory activity
in eastern Pennsylvania, southern New Jersey and Delaware rose
to its highest level in more than two years as employment and
shipments picked up.
The bank's index of business activity index rose to 19.8
from 12.5 in June, far exceeding economists' expectations. Any
reading above zero indicates expansion in the region's
The report adds to early signs that U.S. manufacturing is
expanding despite weakness in the global economy. The New York
Fed said on Monday factory activity accelerated in New York
state in July.
LABOR MARKET RESILIENCE
In a separate report, the Labor Department said initial
claims for state unemployment benefits dropped by 24,000 to a
seasonally adjusted 334,000. It was the lowest reading since May
and a steeper fall than analysts had expected.
The drop in new claims was the latest data to point to
resilience in the labor market. While Washington's austerity
measures appear to have dragged heavily on growth in the first
and second quarters, the pace of hiring has barely slowed, with
employers adding 195,000 jobs in June.
At the same time, the labor market data from last week was
clouded by seasonal factors. Readings for claims can be volatile
in July because many auto factories close to retool, and it is
difficult for the government to adjust the data for seasonal
swings because shutdown schedules vary from year to year.
Still, a four-week average of new claims, which smooths out
volatility, fell 5,250 from a week earlier.
"This is still consistent with moderate job growth," said
Scott Brown, chief economist at Raymond James in St. Petersburg,
The dollar extended a rally against the yen and yields rose
for long-term U.S. government debt, signs that investors were
betting on tighter monetary policy in the future. U.S. stocks
rose to record highs after investment bank Morgan Stanley posted
The jobless claims data covered the same week in which the
Labor Department looks at employers' payrolls to estimate how
many jobs the economy added during the full month. Compared to
the survey week for last month, the four-week average for claims
was 0.7 percent lower last week.
A third report showed a gauge of future U.S. economic
activity held at a near five-year high, with the Conference
Board's Leading Economic Index flat at 95.3 last month.
Bernanke, who appeared before lawmakers for the second
straight day on Thursday, repeated his message that the Fed
would only begin withdrawing its support if the economy improves
as much as policymakers expect.
In a potentially negative sign for the labor market, the
Labor Department said the number of people still receiving
benefits under regular state programs after an initial week of
aid rose 91,000 to 3.1 million in the week ended July 6.
However, analysts said the increase could also be related to
difficulties in adjusting the data for seasonal swings around
America's July 4 holiday.
(Reporting by Jason Lange; Additional reporting by Rodrigo
Campos and Richard Leong in New York; Editing by Andrea Ricci
and Neil Stempleman)