Jobless claims rise. Wait, that's good news?
Jobless claims were projected to drop last week, but they rose unexpectedly instead. But despite the scary numbers, the jobless claims data may include signs that the economy is making forward progress.
Washington — The number of Americans filing new claims for jobless benefits unexpectedly rose last week while U.S. manufacturing improved only slightly in August, worrisome signs for an economy struggling to create enough jobs.
Initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 372,000, the Labor Department said on Thursday.
The data keeps pressure on President Barack Obama ahead of his November re-election bid. Republican challenger Mitt Romney is trying to focus voters' attention on a lofty unemployment rate that has dogged Obama's presidency.
Many economists think the Federal Reserve could unveil a new bond buying program to prop up economic growth as soon as its next meeting Sept. 12-13, although an improvement in hiring this month could make that less likely.
"Jobless claims continue to indicate ... a sluggish labor market," said Peter Cardillo, an economist at Rockwell Global Capital in New York. "The numbers also strengthen the hand of the Fed to aid the economy with more stimulus."
However, Cardillo and other economists said the slow pace of healing in the labor market doesn't necessarily point to immediate action by the Fed.
A separate report by financial information firm Markit showed some of the weakest growth in the manufacturing sector in the last three years, held back by a slowdown in hiring and sluggish overseas demand for American goods.
Markit said its U.S. "flash" manufacturing Purchasing Managers Index edged up to 51.9 in August from 51.4 in July.
The August reading marked the first monthly increase in five months. But it was the third weakest result since the manufacturing sector stopped shrinking in October 2009.
A reading above 50 indicates expansion.
Despite the increase in new claims filed last week, the data on layoffs did have a silver lining.
The data covers the same week looked at by the government for its monthly measure of employment, and showed a slight drop in layoffs from the survey week last month, which is a mildly positive signal for hiring in August.
The four-week moving average for new claims, a measure of labor market trends, was 368,000 last week. That was a slight increase from the prior week, but still 2.1 percent lower than in the second week of July.
That week, the government surveyed employers and concluded 163,000 new jobs were created in July - an improvement from the prior three months though the unemployment rate still ticked higher to 8.3 percent.
"No signs here that there's been a notable pick-up in layoffs, and (that) would suggest to us that moderate job growth continued in August," said Ellen Zentner, an economist at Nomura Securities in New York.
The government will release its employment report for August on Sept. 7, and policymakers at the Federal Reserve will scrutinize the data for signs the economy is improving.
Minutes from the Fed's July 31-Aug. 1 policy review, released on Wednesday, showed the central bank is likely to deliver another round of monetary stimulus "fairly soon" unless the economy improves considerably.
Claims data, which swung wildly in July due to shifts in seasonal auto plant shutdowns, are now giving a clearer picture of the labor market's health. A Labor Department official said there was nothing unusual in the state-level data.
The U.S. economy faces a number of threats, including the looming possibility the government will raise taxes and cut spending. That is already hurting business sentiment.
The euro zone economy will shrink around 0.5 percent in the current quarter, with weakness even spreading through Germany, the region's largest and strongest economy, Markit's Purchasing Mangers' Index suggested.