Soft Economic Data Hint at Near-Term Hiccup in Growth
WASHINGTON -- The number of Americans filing new claims for unemployment aid last week rose to its highest level since May, but economists dismissed the increase as weather-related and said the jobs market remained solid.
They were also little perturbed by other data Thursday that showed factory orders fell in January for a sixth straight month and fourth-quarter productivity declined by more than initially thought.
The reports, however, suggested some near-term weakness in economic growth.
%VIRTUAL-pullquote-The underlying fundamentals of the economy remain solid...%"The underlying fundamentals of the economy remain solid and there is no reason we won't continue to see the type of economic growth and job growth that we saw in 2014 continuing this year," said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh.
Initial claims for state unemployment benefits rose by 7,000 to a seasonally adjusted 320,000 for the week ended Feb. 28, the Labor Department said. It was the second consecutive week of increases.
While the Labor Department cited no special factors influencing the data, economists said cold and snowy weather in February and a strike by petroleum refinery workers were likely to blame.
Data for the week ended Feb. 21 showed a large number of layoffs in Kentucky because of bad weather.
"We suspect the pattern reflects the weather rather than fundamental deterioration. That said, we will, of course, be on watch for the possibility that the rise in the last two weeks marks a change in the trend," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.
The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 10,250 to 304,750 last week.
The claims data has no bearing on Friday's employment report for February as it falls outside the survey period.
Nonfarm payrolls are expected to have increased 240,000 last month after rising by 257,000 in January, according to a Reuters survey of economists. The unemployment rate is forecast falling 0.1 percentage point to 5.6 percent.
The economy added more than a million jobs between November and January, a feat last seen in 1997.
U.S. stocks were trading higher Thursday after the European Central Bank said it would start its new government bond-buying program of 60 billion euros a month on March 9 and raised its economic growth forecast for 2015.
Prices for U.S. Treasury debt were little changed, while the dollar rose to an 11½-year high against the euro.
In a separate report, the Commerce Department said new orders for manufactured goods slipped 0.2 percent in January after dropping 3.5 percent in December.
The department also said orders for non-defense capital goods excluding aircraft -- seen as a measure of business confidence and spending plans -- rose 0.5 percent instead of the 0.6 percent advance reported last month.
Manufacturing has been hurt by softening demand in Europe and Asia as well as a strong dollar and lower crude oil prices, which have caused some energy companies to either delay or cut back on capital expenditure projects.
A labor dispute at U.S. West Coast ports, which has since been resolved, also has weighed on factory activity through disruptions to the supply chain.
There is optimism the sector will regain momentum in the second quarter as some of these factors fade.
'Starting to Turn the Corner'
"There are some signs that the core capital goods data might be starting to turn the corner after a weak end to 2014," said Daniel Silver, an economist at JPMorgan (JPM) in New York.
A second report from the Labor Department showed productivity, which measures worker hourly output, fell at a 2.2 percent annual rate in the fourth quarter as the number of hours worked outpaced output. It was previously reported to have declined at a 1.8 percent pace.
Productivity has been weak for much of the recovery from the 2007-09 recession, helping to boost hiring.
"Of late, job growth has been extraordinary, but it now behooves employers to quickly utilize these new hires as effectively as those already on the job," said Doug Handler, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.
In the fourth quarter, hours worked increased at a revised 4.9 percent rate instead of the previously reported 5.1 percent pace. Compensation an hour rose at a 1.9 percent rate, rather than the 0.9 percent pace reported last month.
That left unit labor costs, a key gauge of inflation and profit pressures that measures the price of labor for any given unit of output, increasing at a 4.1 percent rate in the fourth quarter -- up from the 2.7 percent rate reported last month.