Stubborn Unemployment Claims Suggest Slowdown in Job Creation

Thursday, 19 Apr 2012 08:37 AM

 

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The number of Americans claiming unemployment benefits for the first time fell only slightly last week, suggesting that job growth in April will not improve much after March's disappointing performance.

Other data on Thursday showed factory activity in the Mid-Atlantic region slowed sharply this month and home resales dropped for a second straight month in March.

Economists viewed the string of weak reports as payback after an abnormally warm winter boosted activity and did not believe that the economy would suffer a repeat of 2011, when growth slowed down sharply in the first half of the year.

Editor's Note: Obama’s Economic ‘Fix’ is In . . .

"The economy really benefited from the mild winter in the first quarter. There is no immediate concern that the recovery is in serious jeopardy," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

"We will see the economy slow a notch, but I don't think we are going to see the sharp deceleration that we saw last year."

Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 386,000, the Labor Department said. The prior week's data was revised to show 8,000 more applications received than previously reported.

The four-week moving average for new claims, considered a better measure of labor market trends, rose to 2-1/2 month high.

In a separate report, the Philadelphia Federal Reserve Bank said its Mid-Atlantic business activity index fell to 8.5 this month from 12.5 in March. A reading above zero indicates expansion in the region's manufacturing sector.

While factories in eastern Pennsylvania, southern New Jersey and Delaware received fewer orders and shipped out fewer goods than the prior month, they hired more workers. In addition, unfilled orders piled up a bit after falling in March.

First-quarter economic growth is seen between 2.5 percent and 3.0 percent, little changed from the fourth quarter's 3.0 percent annualized pace.

MORE FED EASING ON THE TABLE

Some economists took a dim view of the data, which came ahead of the U.S. central bank's policy meeting next week.

No major policy announcement is expected, but economists say a third round of bond purchases or other quantitative easing later in the year cannot be ruled out, especially if labor market conditions weaken significantly.

"It's just kind of signaling a weak economy," said Bricklin Dwyer, an economist at BNP Paribas in New York.

"We anticipate the Fed providing more accommodation, although the bar for QE3 is pretty high. In the interim, between now and June, the Fed is likely to get some pretty poor data in terms of jobs, which means they will be falling further behind on their mandate," Dwyer said.

Stocks on Wall Street were flat to marginally lower. U.S. Treasury debt prices rose, while the dollar was little changed against a basket of currencies.

The claims data covered the week for April's nonfarm payrolls survey. The four-week average of new applications rose marginally between the March and April survey periods, suggesting not much change in labor market conditions.

The March payrolls data earlier this month showed employers added 120,000 new jobs, the least since October, after averaging 246,000 jobs per month over the prior three months.

There were mixed signals for the housing market, with a third report showing home resales dropped 2.6 percent to an annual rate of 4.48 million units last month.

But the National Association of Realtors report showed the supply of unsold properties fell to 2.37 million and Realtors in some markets reported shortages of housing stock.

"This should speed up the process of clearing the overhang of inventories in those regions, though there is a stream of foreclosures that will continue to come on to the market throughout 2012," said Ellen Zentner, a senior economist at Nomura Securities in New York.

The median price for a home resale rose to $163,800 in March, up 2.5 percent from a year ago. The months' supply was unchanged at 6.3 months, suggesting prices could still fall.

House prices have fallen by about 32 percent from their peak at the end of 2005.

Editor's Note:
Obama’s Economic ‘Fix’ is In . . .

© 2014 Thomson/Reuters. All rights reserved.

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