Thursday, March 24, 2011

US durable goods orders fall, job market healing

WASHINGTON: New orders for long-lasting manufactured goods fell in February, hinting at some unexpected softness in manufacturing activity and business investment plans.

But other data Thursday, March 24 showed the improvement in the labor market was becoming sustained, with new claims for jobless benefits falling last week and the four-week moving average dropping to it lowest level in more than 2-1/2 years.

The Commerce Department said durable goods orders fell 0.9 percent after a 3.6 percent increase in January. Economists polled by Reuters had expected a 1.1 percent increase. Excluding transportation, orders fell 0.6 percent after dropping 3.0 percent in January.

"Durables were extremely disappointing ... it is not a very good sign for what is happening in the first quarter," said Rudy Narvas, a senior economist at Societe Generale in New York.

The durable goods report conflicted with other data on manufacturing, which have underscored the strength in factory activity.

A second report from the Labor Department showed initial claims for state unemployment benefits slipped 5,000 to a seasonally adjusted 382,000, a touch below economists' expectations for a fall to 383,000.

The four-week moving average of unemployment claims -- a better measure of underlying trends - dropped 1,500 to 385,250, the lowest since mid-July 2008 and holding below the 400,000 level for a fourth straight week.

A reading below 400,000 is generally associated with steady job growth, which until recently had eluded the economic recovery. Employers created 192,000 jobs in February, the most in nine months, after adding a paltry 63,000 new workers in January.

The Federal Reserve has acknowledged the improvement in labor market conditions and is generally expected to conclude its $600 billion government bond buying program at the end of June.

Analysts believe the economy is now on course to create at least 150,000 jobs a month over a sustained period, which should prevent the unemployment rate from rising much, even as Americans who had given up looking for work re-enter the job market.

But some caution the devastating earthquake and tsunami in Japan, and rising gasoline prices could dent business confidence and cause companies to delay hiring.

There are signs that businesses are starting to tread cautiously.

The Commerce Department report showed non-defense capital goods order excluding aircraft, a closely watched proxy for business spending, fell 1.3 percent in February after a 6.0 percent fall the prior month. Economists had predicted a 4.5 percent improvement in this category.

"We all know that housing and consumption will be weak, lagging sectors. So if the business sector's expansion momentum stalls, this is bad news, creating a risk of disappointing employment gains in coming months," said Dan Dorrow, head of research at Faros Trading in Stamford, Connecticut.

The number of people still receiving benefits under regular state programs after an initial week of jobless aid fell 2,000 to 3.72 million in the week ended March 12, the lowest level since September 2008.

The continuing claims data covered the week for the household survey from which the unemployment rate is derived. The jobless rate dipped to 8.9 percent in February from 9.0 percent in January and has dropped 0.9 percentage point in the past three months.

Economists had expected so-called continuing claims to fall to 3.70 million from a previously reported 3.71 million. - Reuters



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