Jobless Claims to Leading Index Show Weakness: Economy

Jobless Claims to U.S. Leading Index Add to Weakness: Economy
The pace of hiring took a tumble last month. Payrolls rose by 96,000 workers in August after a revised 141,000 increase in July that was smaller than initially estimated, the Labor Department said on Sept. 7. Photographer: Patrick Fallon/Bloomberg

More Americans than forecast filed claims for unemployment benefits and an index of leading indicators declined for second time in three months, adding to signs of weakness in the world’s largest economy.

Jobless claims decreased by 3,000 in the week ended Sept. 15 to 382,000, Labor Department figures showed today in Washington. The median forecast of 49 economists surveyed by Bloomberg projected 375,000. The New York-based Conference Board’s gauge of the outlook for the next three to six months fell 0.1 percent after a 0.5 percent increase in July.

Companies are holding back on hiring and investment as overseas demand cools and the prospect of tax increases and spending cuts in the U.S. threatens growth. At the same time, the Bloomberg Consumer Comfort Index climbed to a seven-week high, helped in part by stock-market gains that may offer more support for the household spending that accounts for 70 percent of the economy.

Today’s figures are “consistent with modest growth -- we’re not going into recession, there’s no sort of sign that activity is weakening substantially,” said Jeremy Lawson, senior U.S. economist at BNP Paribas in New York. “But there’s no sign of shifting into a higher gear, either.”

Most U.S. stocks fell as the U.S. data, combined with reports from Europe and Asia, reinforced concern the global slowdown is worsening. The Standard & Poor’s 500 Index lost less than 0.1 percent to 1,460.26 at the close of trading in New York after declining as much as 0.8 percent.

Europe Services

A euro-area services and manufacturing gauge fell to a 39-month low in September, London-based Markit Economics said today in an initial estimate, as European leaders struggled to reverse the single-currency bloc’s slide into recession.

In Asia, a Chinese manufacturing survey pointed to an 11th month of contraction and Japan’s exports fell in August, supporting the case for increased stimulus as the region’s growth slows.

Estimates for U.S. jobless claims in the Bloomberg survey ranged from 360,000 to 390,000. The Labor Department revised the previous week’s figure to 385,000 from an initially reported 382,000. Last week’s data covered the period surveyed by the government to calculate the September employment data.

The pace of hiring took a tumble last month. Payrolls rose by 96,000 workers in August after a revised 141,000 increase in July that was smaller than initially estimated, the Labor Department said on Sept. 7.

Fed Stimulus

The lack of progress in the labor market persuaded the Federal Reserve to announce further accommodation last week. The Fed said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month as it seeks to boost growth and reduce unemployment.

Another report today showed that manufacturing in the Philadelphia region shrank for a fifth straight month in September, reinforcing signs the industry will offer less support to the economy.

The Federal Reserve Bank of Philadelphia’s general economic index improved to minus 1.9, higher than forecast, from minus 7.1 in August. Readings less than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware. The median forecast of 62 economists surveyed by Bloomberg was minus 4.5.

Fiscal Cliff

Companies concerned about the so-called fiscal cliff include Caterpillar Inc., the largest maker of construction and mining equipment. Combined tax increases and spending cuts of about $600 billion are set to take effect at the beginning of next year unless Congress acts.

“The thing that’s really hanging over us right now is there is a large tax increase pending here at year-end, and there are large spending cuts, government spending cuts, looming at yearend,” Michael DeWalt, director of investor relations at Peoria, Illinois-based Caterpillar, said in a Sept. 14 conference presentation. “If something is not done about that, it could be quite negative. So, it’s not a clear picture.”

Companies from Norfolk Southern Corp. to FedEx Corp. are reducing profit forecasts as the slowing economy reduces demand for everything from shipments of commodities to overnight express envelopes.

At the same time, manufacturers were more optimistic about the next six months as the Philadelphia Fed’s future index climbed to 41.2, the highest since January, from 12.5.

Making Headway

Consumer confidence is also making headway. Americans’ view of the economic outlook improved in September as stock prices rallied to a five-year high, according to the Bloomberg Consumer Comfort survey.

The gap between positive and negative expectations narrowed to minus 8 this month, the highest reading since May, as the percentage saying the U.S. was heading in the wrong direction dropped by the most in three years. The weekly index rose to a seven-week high of minus 40.8 in the period ended Sept. 16 from minus 42.2.

The share of households viewing the economy as heading in the wrong direction dropped to 34 percent in September, the fewest since June, from 45 percent the prior month, according to the Bloomberg monthly expectations gauge. The 11-point improvement is the biggest since October 2009.

Women and Americans living in the Northeast were among the groups that showed the biggest declines in pessimism this month, the report showed. Those saying the economy was on the right track climbed to 26 percent this month from 23 percent in August.

Unexpected Gains

The Bloomberg Consumer Comfort Index is in line with the Thomson Reuters/University of Michigan preliminary consumer sentiment for September, which unexpectedly rose to a four-month high of 79.2, according to a report last week.

Growing confidence may help boost consumer spending after disappointing results last month. Sales at general merchandise, clothing and electronics stores dropped in August, data from the Commerce Department showed last week. Total retail sales increased 0.9 percent, the most in six months, led by demand for automobiles and a surge in receipts at service stations as gasoline prices climbed.

Kohl’s Corp. of Menomonee Falls, Wisconsin, the third-largest U.S. department-store company, plans to hire more than 52,700 workers to help with year-end holiday sales, an increase of more than 10 percent from last year, according to a company statement this week.

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