WASHINGTON – The economy, declared in recession just days ago, is showing mixed signals for the future: Orders for big-ticket goods are up by the largest amount in at least nine years, but layoffs are rising, too.
The latest batch of economic data released Thursday provided something for both optimists and pessimists regarding the prospects for an economic recovery.
Optimists pointed to the big-jump in new orders for manufactured goods as an encouraging sign the downturn will be short and shallow. Pessimists worried that the surge in layoffs, along with expectations of higher unemployment, could make consumers retrench, pulling the economy deeper into recession.
Despite such mixed opinions, many analysts agree that the economy is extremely fragile and believe that the Federal Reserve will probably cut interest rates for an 11th time this year at its next meeting on Dec. 11.
In a rare bright spot for the nation's battered manufacturing sector, orders to U.S. factories soared 12.8 percent in October, reflecting stronger demand for airplanes, cars and computers, the Commerce Department said. It was the first increase since May and the largest since the government began keeping records based on the current classification system in March 1992.
On Wall Street, the news helped to lift stocks. The Dow Jones industrial average rose 117.56 points to close at 9,829.42.
The rebound in durable goods -- items expected to last at least three years -- came after new orders dropped by 9.2 percent in September.
"New orders are the seeds of future production," said Sal Guatieri, economist with Bank of Montreal and Harris Bank, adding the report suggests businesses are more confident in the economic outlook and may be planning to increase investment.
"Inventories are quite lean and businesses may have to raise production in coming months," he said.
While welcoming the increase in big-ticket orders, National Association of Manufacturers President Jerry Jasinowski didn't believe it was a harbinger of a business recovery.
"Most of the rise in new orders is clearly due to a response to Sept. 11, the war in Afghanistan and an incentive-driven pickup in auto sales -- not to a general revival in the business climate," Jasinowski said.
Hardest hit by the sour economy, factories have responded by sharply cutting production and laying off workers.
After falling four weeks in a row, new claims for unemployment insurance jumped last week by 54,000 to 488,000, the highest level since late October, the Labor Department said. Workers continuing to collect benefits soared to a 19-year high of 4.02 million for the work week ending Nov. 17.
Economists said that the level of claims suggest that the nation's unemployment rate will rise to 5.6 percent in November from the current 5.4 percent. The government will release November's employment report next week.
Meanwhile, an index of newspaper want ads, a key barometer of the job market and the economy, fell from 52 to 46 in October, the lowest reading since 1982, the Conference Board said.
Despite layoffs and rising unemployment, Americans -- lured by low mortgage rates -- continued to buy new homes.
New-home sales, after rising by 1 percent in September, edged up 0.2 percent in October, the Commerce Department said.
Low mortgage rates have helped to keep the market solid during the economic downturn. In early November, Freddie Mac, the mortgage company, said rates on 30-year mortgages fell to 6.45 percent, the lowest in nearly 30 years of record keeping.
But this week rates rose sharply from 6.75 percent to 7.02 percent, the highest level since late July.
"That may dampen demand for new homes in coming months," said Michael Carliner, economist for the National Association of Home Builders.
The National Bureau of Economic Research on Monday declared that the economy has been in recession since March, the first downturn in a decade.
In the third quarter, the economy shrank at a 0.4 percent rate. Many economists expect that number will be revised even lower to show a 1 percent rate of decline when the government releases another estimate of third quarter gross domestic product on Friday.