Jobless claims fall, manufacturing orders rise
WASHINGTON -- A pair of better-than-expected economic reports in the U.S. added to the breath of relief on Wall Street after Europe’s top central banker pledged to do whatever is necessary to preserve the euro.
The Labor Department said Thursday that initial jobless claims fell sharply last week, and the Commerce Department reported that new orders for longer-lasting manufactured goods rose at a healthy rate in June.
Neither report was as good as it appeared on the surface, but investors seemed to look past that as they took comfort from the news out of Europe. Mario Draghi, president of the European Central Bank, hinted that banking authorities could buy more sovereign bonds, a move that could drive down yields of struggling countries such as Spain and Italy and help to combat the region’s long-running debt crisis.
His remarks at a conference in London triggered a rally in Europe and gave a lift as Wall Street opened Thursday.
Still, analysts remained cautious about the economic prospects abroad and at home. Data on U.S. gross domestic product in the second quarter, to be released Friday, are expected to show an anemic growth rate of 1.5% or less -- a pace too weak to bring down the nation’s high unemployment rate.
Thursday’s economic reports, mixed as they were, may give the Federal Reserve more reason to hold off until its September meeting, when it has more solid data in hand, before taking new action to spur economic growth and hiring.
The Fed meets Tuesday and Wednesday, and some analysts think it could take a preliminary step to stimulate the economy by extending its pledge to keep short-term interests near zero beyond 2014. Fed Chairman Ben S. Bernanke and his colleagues are increasingly worried about the flagging job market, which has slowed sharply in the second quarter.
The latest report on new jobless claims was encouraging, as filings dropped to 353,000 last week from a revised 388,000 the prior week. It was the third decline in four weeks. Still, economists said the weekly drop should be taken with a pinch of salt, as the data are highly volatile from week to week, especially in the summer when auto plants are shut down temporarily for retooling.
What’s more, trends in weekly jobless claims reflect layoffs, not new hiring. The main problem with the job market today is that employers, concerned about the uncertain economic outlook, are reluctant to add new workers.
Thursday’s manufacturing report on durable goods showed new orders rose 1.6% in June. But excluding civilian aircraft and defense-related products, a volatile category, new orders for so-called core capital goods actually fell 1.4% in June, underscoring a general softening of the manufacturing sector.
“The underlying details reveal fundamental weakness in business-equipment orders,” said Daniel J. Meckstroth, chief economist for the trade group Manufacturers Alliance for Productivity and Innovation.
The business-equipment sector, which includes machinery, computers and electronic products, posted declining orders in June. U.S. manufacturing and exports -- which have powered the economic recovery -- have slowed as Eurozone economies have slid back into recession and wary American businesses have curbed their spending.
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