Jobless Claims, Factory Data Give Economy Some Shine

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weekly jobless claims
Lynne Sladky/APJob seekers at a recent workshop in Davie, Fla.
By Lucia Mutikani

WASHINGTON -- New applications for unemployment benefits held near their pre-recession levels last week and factory activity in the mid-Atlantic region accelerated in April, painting a bright picture of the economy.

The economy is regaining its footing after a brutally cold winter and is back on track for faster growth later this year.

"The data add further evidence to the notion that the economy has exerted positive momentum at the start of the second quarter," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, N.C.

Initial claims for state unemployment benefits ticked up 2,000 to a seasonally adjusted 304,000 for the week ended April 12, the Labor Department said on Thursday, but stayed close to a 6½ year low touched the prior week.

Economists had forecast first-time applications for jobless benefits rising to 315,000. %VIRTUAL-article-sponsoredlinks%The four-week moving average for new claims, which irons out week-to-week volatility, hit its lowest level since October 2007.

In a separate report, the Philadelphia Federal Reserve Bank said its business activity index increased to 16.6 this month from 9 in March. April's reading was the highest in seven months and beat economists' forecasts for only a rise to 10.

A reading above zero indicates expansion in the region's manufacturing, which covers eastern Pennsylvania, southern New Jersey and Delaware. There was a surge in new orders and shipments. Factory employment also increased and workers put in more hours than they did in March.

U.S. stocks were little changed as underwhelming results from tech giants Google (GOOG) and IBM (IBM) offset the fairly upbeat economic reports. Prices for U.S. Treasury debt fell and the dollar slipped against a basket of currencies.

The reports were the latest in a series to suggest an upswing in the economy. Retail sales and industrial production were robust in March. Employment has picked up since wobbling in December and there is some inflation in the economy.

The harsh winter, combined with weak exports and stock accumulation by businesses, is expected to have cut gross domestic product to an annual growth pace of around 1.5 percent in the first quarter after a 2.6 percent rate in the October-December period.

But the economy is expected to snap back in the second quarter as the drag from the weather and inventories fades. Second-quarter GDP growth estimates range as high as a 3.6 percent pace.

Federal Reserve Chair Janet Yellen said Wednesday the economy was making "very meaningful progress", adding it was "quite plausible" it would be back to near full employment by the end of 2016.

Upbeat Data

Some economists argue that the recent raft of upbeat data, especially labor market indicators, suggests there might not be a lot of slack in the economy, as policymakers believe.

"The jobless claims data also suggest the labor market may be making progress toward the Fed's labor market objective more quickly than many policymakers expect," said John Ryding, chief economist at RDQ Economics in New York.

The claims data covered the survey week for April nonfarm payrolls. Despite last week's increase, claims were down 19,000 between the March and April survey periods, which suggests an acceleration in job growth.

Job growth averaged about 195,000 a month in February and March, with the unemployment rate holding at near a five-year low of 6.7 percent during that period.

Labor market indicators such as job openings, the duration of unemployment and short-term unemployment, suggest some tightening in conditions.

The health of the labor market will most likely determine when the U.S. central bank starts raising benchmark interest rates, which it has kept near zero since December 2008.

The Fed is expected to conclude its monthly bond buying program later this year and most economists expect the first rate hike will be in the second half of 2015.

The claims report showed the number of people still receiving benefits after an initial week of aid dropped 11,000 to 2.74 million in the week ended April 5. That was the lowest level in the so-called continuing claims since December 2007.

"The ongoing improvement in continuing claims remains encouraging amid more positive labor market dynamics, suggesting that workers are not simply leaving the labor force but likely finding gainful employment," said Gennadiy Goldberg, an economist at TD Securities in New York.

-Additional reporting by Rodrigo Campos.

Jobless Claims, Factory Data Give Economy Some Shine
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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