Weak job, factory data raise concerns
The U.S. factory sector and the job market showed surprising weakness in data released Thursday, raising concerns that the Federal Reserve might need to deliver more interest rate cuts to shore up the economy.
A report by the Philadelphia Federal Reserve Bank showed manufacturing in the mid-Atlantic region grew less than economists predicted in October. Its business activity index dipped to 6.8 in October from 10.9 in September.
Economists polled by Reuters had forecast a reading of 7.3. Any reading above zero indicates growth in the region’s manufacturing sector.
The report’s inflation gauge shot higher, however, suggesting that the Fed will have to choose between taming price growth and supporting the economy when it meets this month.
“I’m just happy it’s keeping its head above water. Despite the gyrations in the financial markets and some degree of credit squeeze, manufacturing is forging ahead,” said Ken Mayland, president of ClearView Economics, in Pepper Pike, Ohio.
A separate report showed the number of U.S. workers filing new claims for jobless aid registered an unexpectedly steep increase in the latest week, raising concerns about an economy already struggling with the effects of a housing slump.
The Labor Department said new claims for unemployment aid climbed by 28,000 last week to 337,000, much more than expected and the biggest increase for any week since February.
The increase was more than four times larger than the gain of 6,000 that economists had been expecting and could be a sign that the labor market is starting to weaken under the effect of a severe downturn in housing and the credit crisis that jolted financial markets in August.
Government analysts said that part of last week’s big rise probably reflected trouble in adjusting the numbers for normal seasonal changes at the start of a new quarter, a time when claims often surge.
The four-week average for claims edged up to 316,500, the highest level in four weeks.
A separate report from the Conference Board in New York showed its index of leading economic indicators rose a modest 0.3% in September after declining 0.8% in August, offering some reassurance about future prospects.