Jobs, Factory Data Bring Holiday Cheer
WASHINGTON – The U.S. economy received an early Christmas present on Thursday when reports on the job market and the manufacturing sector offered tentative evidence the worst may be over for the recession-mired United States.
The number of Americans applying for first-time unemployment benefits fell for the third straight week last week to the lowest level since July, the government said in a report that provided further signs the pace of layoffs in the weak U.S. economy may be slowing.
Claims for first-time jobless benefits fell unexpectedly to a seasonally adjusted 384,000 in the week ended Dec. 15 from 395,000 in the prior week, the Labor Department said. That was the lowest level since the week ended July 28.
The four-week average -- considered a more reliable barometer of trends in jobless claims filings since it smooths out week-to-week fluctuations -- fell to 438,000 last week from 450,250 in the Dec. 8 week.
That was the lowest level for the average since the week ending Sept. 22, immediately following the attacks on the World Trade Center and the Pentagon, which hit the economy hard and spurred a sharp rise in unemployment.
``We've seen the brunt of those layoffs and things are settling down significantly,'' said Richard DeKaser, chief economist at National City Corp. in Cleveland.
Initial jobless claims peaked at 535,000 in late September while the four-week average hit a high of 505,750 mid-October.
U.S. Treasury bond prices fell after Thursday's jobless report was released as investors, believing the data hinted that a recovery in the U.S. economy was around the corner, pulled out of the safe-haven bond market.
However, stock prices were down midday as investors instead focused on grim corporate profit forecasts.
MANUFACTURING LOOKS BETTER
In another upbeat report, the Federal Reserve Bank of Philadelphia said manufacturing activity in the U.S. mid-Atlantic region rebounded sharply in December. The Philadelphia Fed's monthly index of business conditions posted its 13th straight month of contraction but the hard-hit sector showed signs of a recovery.
The regional Fed bank said its index jumped to -5.5 in December from -20.2 in November, bouncing back from an eight-month low of -27.4 hit in October following the Sept. 11 attacks. Any reading below zero suggests shrinking activity.
The current new orders index, seen as a gauge of future activity, also rose solidly to -3.8 in December from -15.7 in November.
The Philadelphia Fed, one of the nation's 12 regional Fed banks, serves Delaware, eastern Pennsylvania and southern New Jersey -- a highly industrialized region that is considered a bellwether for national manufacturing activity.
``It's another indication that the manufacturing sector is getting a grip on itself,'' said Alan Levenson, chief economist at T. Rowe Price Associates in Baltimore. ``After the sharpest inventory correction in history this year, we are beginning to see the rates of decline in factory output stabilize and perhaps diminish.''
Economists said the claims and manufacturing data, along with reports this week showing continued housing sector strength and a rapid decline in inventories, suggest the U.S. economy may soon hit bottom, if it has not done so already.
``I think we are beginning to see the light at the end of the tunnel,'' said Sung Won Sohn, chief economist at Wells Fargo Bank in Minneapolis.
The economy sank into a recession in March and while most analysts believe the United States will rebound sometime next year, there are differing opinions about how strong the rebound will be and when exactly it will come.
Some analysts cautioned against getting too excited about the data released on Thursday, since unseasonably warm weather has likely been distorting some of the numbers and weekly and monthly figures often fluctuate widely.
``It's far too early to call a victory on the (jobless) claims front,'' said Diane Swonk, chief economist at Bank One in Chicago. Swonk predicted jobless claims will rise in January, when temperatures are likely to turn colder and construction workers and others who usually lose their jobs in the winter months are likely to be given pink slips.
On a somber note, data in the weekly unemployment report suggested U.S. workers who are laid off are having a tough time finding new jobs. The number of workers continuing to receive unemployment benefits rose to 3.7 million in the week ended Dec. 8, the period of most recent data. That was up from 3.6 million in the prior week.
The increase in continuing claims led to a rise in the insured unemployment rate, a measurement of the portion of the workforce receiving jobless benefits. That rate was 2.9 percent in the Dec. 8 week, up 0.1 percent from the previous week.
Roughly 1.2 million Americans have lost their jobs since the U.S. economic recession began in March, the majority of those losses coming since the Sept. 11 attacks. Economists watch employment trends closely since workers' job security is considered the key determinant of consumer spending, which accounts for two-thirds of U.S. consumer spending.