WASHINGTON: The number of Americans filing new claims for jobless benefits dipped last week and factory activity grew but at a slower pace in May, indicating the economy was plodding along despite growing headwinds from Europe.
Though yesterday's economic reports were a bit lackluster, they offered no signs of deterioration in the world's largest economy as growth in countries like China slows and the euro zone edges toward a recession.
"We are growing at moderate pace of two to two-and-a-quarter percent, but we have some headwinds that are starting to assert themselves, particularly coming from Europe," said Paul Edelstein, an economist at IHS Global Insight in Lexington, Massachusetts.
Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 370,000, the Labor Department said. The four-week moving average, considered a better measure of labor market trends, dropped 5,500 to 370,000.
Claims have been little changed in the past four weeks after spiking in April. That suggests some improvement in the pace of job creation this month after April's disappointing 115,000 gain in nonfarm payrolls.
Europe's festering debt problems and slower growth in China are starting to hurt American factories.
In a separate report financial information services firm Markit said its US "flash" manufacturing Purchasing Managers Index fell to 53.9, a three-month low, from 56.0 in April.
A reading above 50 indicates expansion and overall, the factory sector extended a 32-month growth streak.
Markit Chief Economist Chris Williamson attributed the moderation in activity to export sales, reflecting the deteriorating economic situation in Europe as well as slower growth in China.
Several European countries, including Britain and Spain, have already tumbled back into recession, while recent economic indicators have shown that China's days of consistent double-digit growth have come to an end.
A third report from the Commerce Department showed new orders for durable goods in April rose 0.2 percent after dropping 3.7 percent in March.
Orders for durable goods, which vary from toasters to aircraft, were lifted by demand for transportation equipment.
FROM: REUTERS
But non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 1.9 percent in April after dropping 2.2 percent in March. The durable goods report, however, is notoriously volatile.
"The good news is that weaker global growth is not yet leading to a collapse in durable goods orders in the United States," said Scott Anderson, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
"On a relative basis, US durable orders are holding up fairly well, considering the substantial headwinds."
US stocks were little changed in morning trade, while government bond prices weakened. The dollar was flat against a basket of currencies.
Though jobless claims have barely budged this month, there are no signs of deterioration in the labor market. The number of people still receiving benefits under regular state programs after an initial week of aid fell 29,000 to 3.26 million in the week ended May 12.
The so-called continuing claims data covered the week used by the household survey to derive the unemployment rate. The jobless rate dropped to 8.1 percent in April from 8.2 percent the prior month, mostly because more people gave up the hunt for work.
While more states are losing eligibility for extended benefits for the long-term unemployed, that is not yet being fully captured in the claims data as the figures are reported with a time lag.
Economists expect that as more people fall off the unemployment benefit rolls, that will artificially push down the jobless rate. Out-of-work people not receiving benefits are not obliged to be actively looking for work, a key criteria to be counted as unemployed.
FROM: REUTERS
US economy trudges along as others falter
