The
number of Americans filing applications for unemployment benefits
increased moderately last week, pointing to still strong labour market
conditions despite signs that economic activity was slowing.
Other
data yesterday showed factory activity in the mid-Atlantic region
rebounded sharply in July, reaching its highest level in a year.
That added to recent surveys on manufacturing that have suggested the struggling sector was stabilising.
The
improvement in the regional factory surveys likely reflects a decision
by President Donald Trump not to impose tariffs on Mexican goods after
the two countries struck a deal on immigration.
But manufacturing,
which makes up about 12% of the economy, remains hamstrung by weaker
business spending on equipment, an inventory glut, a bitter trade war
between the United States and China, and softening global growth.
“This
big swing in the data over the past couple of months may reflect
changing attitudes on trade given that the sampling for the June reports
probably occurred around the time of peak concern about trade policy
between the US and Mexico,” said Daniel Silver, an economist at JPMorgan
in New York.
Initial claims for state unemployment benefits rose
8,000 to a seasonally adjusted 216,000 for the week ended July 13, the
Labour Department said, remaining in the middle of their 193,000-230,000
range for this year.
Last week’s increase in claims was in line with economists’ expectations.
The
claims data tends to be volatile around this time of the year because
of summer factory closures, especially in the automobile industry, which
occur at different periods.
This can throw off the model the government uses to strip out seasonal fluctuations from the data.
Layoffs
remain low despite the US-China trade tensions, which have contributed
to a dimming of the economy’s outlook and led the Federal Reserve to
signal it would cut interest rates at its July 30-31 meeting for the
first time in a decade.
Last week’s claims data covered the survey period for the nonfarm payrolls component of July’s employment report.
Claims were little changed between the June and July survey periods, suggesting strong job growth this month.
The economy created 224,000 jobs in June.
“Firms
remain extraordinarily reluctant to lay off workers and the labour
market remains extremely tight,” said John Ryding, chief economist at
RDQ Economics in New York. “There is no reason to expect anything but a
solid jobs report for the month.”
The dollar was steady against a basket of currencies, while US Treasury prices fell.
Stocks on Wall Street were lower.
There
are, however, concerns that a shortage of workers and the Trump
administration’s tougher stance on immigration could impede job growth.
The
Fed’s Beige Book report of anecdotal information on business activity
collected from contacts nationwide published on Wednesday showed some
manufacturing and information technology firms in the Northeast reduced
their number of workers from mid-May through early July.
It said “a
few reports highlighted concerns about securing and renewing work visas,
flagging this as a source of uncertainty for continued employment
growth.”
Solid job growth is helping to underpin the economy, which
is slowing as last year’s massive stimulus from tax cuts and more
government spending fades.
Weak manufacturing and housing, as well as a widening trade deficit are partially offsetting strong consumer spending.
The Atlanta Fed is forecasting gross domestic product rising at a 1.6% annualised rate in the second quarter.
The economy grew at a 3.1% pace in the January-March period.
The
slowdown in activity was underscored by a second report yesterday from
the Conference Board showing its measure of future economic growth fell
for the first time in six months in June.
The 0.3% drop in the
leading indicator, the largest since January 2016, “suggests growth is
likely to remain slow in the second half of the year,” the Conference
Board said.
But manufacturing appears to be improving.
In a third report, the Philadelphia Fed said its business conditions index jumped to a reading of 21.8 in July from 0.3 in June.
That was the highest level since July 2018 and reflected strong increases in measures of new orders, employment and shipments.
The
improvement in manufacturing in the region that covers eastern
Pennsylvania, southern New Jersey and Delaware mirrors other measures on
factory activity.
It probably overstates the outlook for manufacturing, however.
A
survey from the New York Fed on Monday showed a mild rebound in its
business conditions index in July after contracting in June.
While
overall manufacturing production increased last month, output at
factories fell at a 2.2% annual rate in the second quarter, the sharpest
decline in three years, the Fed reported on Tuesday.
Manufacturing production dropped at a 1.9% pace in the first quarter.
“The
troubles that have plagued industry continue to linger,” said Roiana
Reid, an economist at Berenberg Capital Markets in New York.
The
Philadelphia Fed survey’s measure of prices received by manufacturers in
the mid-Atlantic region increased this month, as did a gauge of prices
paid by factories.
Both measures, however, remained well below their
lofty readings over the past few month, consistent with expectations of
moderate inflation.
The survey’s six-month business conditions index
jumped to a reading of 38.0 this month, the highest reading since May
2018, from 21.4 in June. Its six-month capital expenditures index
increased to 36.9 from a reading of 28.0 in the prior month.
A job seeker (centre) takes a business card at a resource fair in Belmont, New Hampshire, US (file).