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Job market, factory activity remain weak
January 15, 2009 / 12:02 AM / 9 years ago

Job market, factory activity remain weak

NEW YORK (Reuters) - Job losses in the moribund U.S. economy mounted last week and manufacturing remained in dire straits this month, while other data on Thursday showed the threat of deflation persisted in December.

<p>Monty McCleskes fills out an application form at a job fair organized by The News-Press newspaper in Estero, Florida, January 14, 2009. REUTERS/Carlos Barria</p>

The number of U.S. workers filing new claims for unemployment benefits rose to a seasonally adjusted 524,000 last week, underscoring a bleak outlook after the worst year of job cuts since 1945.

Factory activity in New York state and the Mid-Atlantic region shrank in January, but the pace of contraction eased a bit, according to a separate reports that still highlighted a weak employment outlook in the manufacturing sector.

U.S. producer prices fell for a fifth straight month in December, government data showed, indicating worries over a deflationary spiral of falling prices, wages and economic activity remained a serious concern.

”There is a major reduction in global demand for everything -- commodities, food and oil,“ said Brian Fabbri, managing director of economic research at BNP Paribas. ”Prices keep coming down as demand keeps slipping away.

“The two regional factory surveys are not as bad as they were in December, but frankly, they are pointing to very, very weak economic activity ... December may prove to be the trough month, but it may take a long time and a lot of effort to get them back to neutral.”

U.S. stocks ended higher in a trading session that was marked by volatility caused by the latest worries over the health of the financial sector.

U.S. government bonds, which usually benefit from signs of economic weakness, were steady to higher on the day.


The initial jobless claims were worse than analysts’ forecasts for an increase to 500,000 and above the prior week’s upwardly revised 470,000. The data also suggest little change after the worst year of job destruction in more than half a century.

In all of 2008, 2.6 million people lost their jobs, the largest slump in employment since a 2.75 million drop in 1945 when the country demobilized at the end of World War Two.

<p>The Labor Department said the producer price index fell 1.9 percent in December, sliding for a fifth straight month, after dropping 2.2 percent the previous month. REUTERS/Graphic</p>

Looking beyond seasonal adjustments, there was even worse news. Continued claims -- which shows the number of people staying on benefits after drawing an initial week of aid -- fell to a seasonally adjusted 4.5 million from 4.6 million.

However, the raw figure of continued claims rose to a record 5.8 million from 5.3 million the prior week, which was the previous record high.

The New York Federal Reserve’s Empire State factory index rose to a still-anemic minus 22.20 this month, strengthening a bit from a downwardly revised minus 27.88 in December.

Underscoring the grim jobs picture, the Empire State’s employment index for the factory sector fell to minus 26.14 in January from minus 23.40 in December.

<p>Truck driver Randy Walker fills his rig's tanks at a gas station in the town of Nevada, Iowa, December 6, 2007. REUTERS/Jason Reed</p>

The Philadelphia Federal Reserve Bank reported its business activity index at minus 24.3 after a reading of minus 36.1 for December.

Any reading below zero indicates contraction in the region’s manufacturing, but the result was better than economists’ expectations of a minus 35.0 reading, according to the median of their forecasts in a Reuters poll.

Still, the Philadelphia Federal Reserve’s index has been negative for 13 of the past 14 months, corresponding to the current recession.

The Philly Fed’s jobs gauge tumbled to minus 39.0 from December’s negative 28.6.

Also, adding weight to deflation worries, the survey’s prices-paid gauge hit a record low, as did the Empire State’s inflation reading.

Also on the inflation front, the Labor Department said producer prices fell 1.9 percent month-on-month in December after dropping 2.2 percent the previous month. Producer prices were down 0.9 percent from a year earlier.

A record drop in gasoline prices helped the fall, which may be good news to businesses and consumers. However, analysts say an environment of persistent and broadly falling prices can be destructive to wages, consumer spending and business activity.

For now, though, the lack of price pressures may allow the Federal Reserve to deploy all its forces to fight the current recession, which started with the bursting of this decade’s housing bubble and has cut a broad swathe of destruction through the economy.

Additional reporting by Lucia Mutikani in Washington, Pedro Nicolaci da Costa and Richard Leong in New York; writing by Burton Frierson in New York; Editing by Dan Grebler

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