Economic Data Points to a Modest Recovery

Reports on unemployment claims, corporate purchases, construction spending and help-wanted advertising Thursday suggested that the recovery is continuing--but at a less-than-scintillating pace.

The number of Americans filing for unemployment help dropped in the third week of July, the Labor Department said.

California ran counter to the trend, however. It reported a net increase of 6,700 new unemployment claims because of layoffs in agriculture, food processing, aerospace and electronics.

In other reports, the National Assn. of Purchasing Management said corporate purchases of goods and services increased in July, the Commerce Department said construction spending edged up in June and the Conference Board said help-wanted ads rose slightly in June.

The Labor Department said that for the week ending July 20, 404,000 Americans filed first-time claims for unemployment benefits, a decrease of 21,000 from the previous week’s 425,000.

Surprisingly, financial markets reacted negatively to the jobless claims report--both stock and bond prices fell. Investors read the decline in jobless claims as an indication that with the employment picture improving, the Federal Reserve Board is less likely to cut interest rates further to stimulate the economy.

In another indication of an improving economy, the purchasing managers’ index rose to 51.8% in July from 50.9% in June.

The two months marked the first time that the index, a closely watched barometer of the health of the manufacturing sector, has been above 50% since June, 1990. A reading above 50 is considered a sign of an expanding manufacturing sector, while a reading below it is viewed as an indication that manufacturing is declining.

In a third report, the Commerce Department said construction spending edged up 0.3% in June to a seasonally adjusted annual rate of $400.3 billion, with the improvement led by a 2.3% jump in residential construction.

The Conference Board said the June increase in its index of help-wanted advertising volume--to 97 from 94--was too small to herald a turnaround in the job market. The West Coast was the only region that failed to show an increase in ad volume, it added.

The various economic reports backed up the widely held belief that the economy is pushing ahead, but at a weak pace, analysts said.

“Nobody knows whether it’s just a flash in the pan or something that’s sustainable,” said Robert Dederick, chief economist at the Northern Trust Co.

Last week, the government reported that the economy began growing again in the April-June period, but the increase in the gross national product, or total output of goods and services, was a barely perceptible 0.4%. It was the first quarterly growth after two straight declines.

Some economists are worried that there will be a “double dip” in the recession--that economic activity will decline again after the second quarter’s advance.

Congressional Democrats, rushing to enact legislation that would extend jobless benefits to the long-term unemployed, were unimpressed that jobless claims had fallen.

“Of course, for the jobless it’s an indistinguishable and useless statistic,” said House Speaker Thomas S. Foley (D-Wash.)

He and other Democrats, fending off opposition to the extended benefits bill from the Bush Administration, note that 2 million Americans are still out of work because of the recession.

Foley said all the economic information he has “indicates a very severe concern, even pessimism, about the strength of the recovery.”

Since hitting peaks of more than half a million in March, the jobless claims number has fallen steadily, with a few exceptions.

The number can be extremely volatile from week to week. Most analysts say decreases need to stretch for several weeks before they signal a significant turnaround in the labor market.

The latest 21,000-claim decrease followed two weeks of increases. Still, it brought the level close to the 400,000 mark, which analysts consider the level needed to be consistent with a recovery.

Pennsylvania led the states with declines in jobless claims, reporting a decrease of more than 8,800. A pickup in apparel, services, construction and manufacturing helped bring about the decrease, state officials said.

Help-Wanted Index

seasonally adjusted The Conference Board’s help-wanted advertising index measures the monthly volume of employment advertising in major newspapers nationwide.

June, ‘91: 97 Source: The Conference Board

Construction Spending

Billions of dollars, seasonally adjusted

June, ‘91: 400.3

May, ‘91: 399.2

June, ‘90: 450.4

Purchasing Managers’ Index

The purchasing managers’ index tracks overall business activity at 300 industrial companies.

July, 1990: 47.6%

August, 1991: 51.8%

Source: National Assn. of Purchasing Management