The Fed is currently buying $85 billion in bonds a month and has said it would keep up purchases until the labor market outlook improves substantially, although officials are increasingly divided over the wisdom of that course.
“The economy is in a holding pattern. It’s not going to strengthen sufficiently to justify an end of the current program,” said Millan Mulraine, senior economist at TD Securities.
Initial claims for state unemployment benefits increased 20,000 last week to a seasonally adjusted 362,000, unwinding the bulk of the previous week’s decline, the Labor Department said.
A second report from the department showed that consumer prices were flat for a second consecutive month in January as gasoline prices fell and the cost of food held steady.
In the 12 months through January, consumer prices rose 1.6 percent, the smallest gain since July, suggesting there was little inflation pressure to worry the Fed.
News on the manufacturing sector, which has supported the economy’s recovery from the 2007-9 recession, was downbeat.
The Philadelphia Fed’s business activity index dropped to minus 12.5 in February, the lowest level since June. The index, which measures factory activity in the mid-Atlantic region, had fallen to minus 5.8 in January. A reading below zero indicates contraction in the region’s manufacturing sector. The survey covers factories in eastern Pennsylvania, southern New Jersey and Delaware.
The American economy braked sharply in the fourth quarter, but grew at a 2.2 percent clip for the full year. Output is being hampered by lackluster demand as employment struggles to gain traction.
Job growth has been far less than the at least 250,000 a month over a sustained period that economists say is needed to significantly reduce the ranks of unemployed. The unemployment rate rose 0.1 percentage point to 7.9 percent in January.
Last week’s data on initial jobless claims covered the survey period for the government’s closely watched monthly tally of nonfarm jobs. Jobless claims were up 27,000 between the January and February survey periods.
However, the increase probably does not suggest any material change in the pace of job growth given that claims have been very volatile since January because of difficulties smoothing the data for seasonal fluctuations.
Despite the weak factory and jobs data, there is reason for optimism about the economy. The housing market recovery is gaining momentum. A report from the National Association of Realtors showed existing home sales rose 0.4 percent last month, pushing the supply of homes on the market to a 13-year low. The median home price rose 12.3 percent from a year ago.
Although consumer prices excluding food and energy rose 0.3 percent — the largest gain since May 2011 — most of that reflected outsize increases in apparel and education costs.
“January is a tough month because you get a lot of price hikes at the start of the new year and the seasonals have a hard time sort of adjusting,” said Omair Sharif, an economist at RBS. “I don’t expect the core C.P.I. to maintain that pace of increase in the near-term.”
The Conference Board said its index of leading economic indicators rose 0.2 percent in January to 94.1, after an 0.5 percent increase in December.
Article source: http://www.nytimes.com/2013/02/22/business/economy/claims-for-jobless-benefits-rise.html?partner=rss&emc=rss
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