Unemployment Data Signals a Softening Economy

Underscoring the softening growth outlook, another report on Thursday showed that a gauge of future economic activity fell in March for the first time in seven months. These reports are the latest to indicate a step back in the economy after a brisk start to the year as tighter fiscal policy began to set in.

“The evidence is mounting that the economy lost momentum in March and that has carried to April,” said Ryan Sweet, a senior economist at Moody’s Analytics.

Economic reports for January and February have suggested that growth accelerated in the first quarter after activity almost stalled in the final three months of 2012.

But in a replay of the previous two years, the economy appears to have hit a speed bump at the end of the quarter, with data like employment, retail sales and manufacturing weakening significantly in March.

Initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 352,000, the Labor Department said. The four-week moving average for new claims, a better measure of labor market trends, rose 2,750, to 361,250.

While claims rose last week, they were still at levels that economists normally associate with average monthly job gains of more than 150,000. That helped ease concerns of a deterioration in labor market conditions after employment had its smallest increase in nine months in March. Employers added 88,000 workers to their payrolls last month after a solid 268,000 increase in February.

“Labor market conditions still appear to be grinding forward, but pushing against the weight of a slowing economy and subdued confidence,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

In separate report, the Federal Reserve Bank of Philadelphia said its business activity index fell to 1.3 in April from a reading of 2.0 in March. A reading above zero indicates expansion in the region’s manufacturing.

Details of the survey, which covers factories in eastern Pennsylvania, southern New Jersey and Delaware, were weak. Measures of factory employment and new orders contracted.

Inventories fell sharply after being flat in March, an indication that stock accumulation will not contribute to growth in the second quarter. Inventories are expected to have significantly increased output in the first three months of 2013.

“This report has to raise some concerns that the nation’s manufacturing sector may be starting to feel the impact of the higher taxes on households and the cutbacks in government spending,” said Joel Naroff, chief economist at Naroff Economic Advisors.

A third report supported views that the economy was again headed for a soft patch this spring. The Conference Board said its index of leading economic indicators slipped 0.1 percent to 94.7 last month, the first drop since August.

The data provides ammunition for the Federal Reserve to maintain its aggressive policy easing, despite a rift among policy makers on continuing asset purchases.

“Growth is continuing but a spring slowdown looks to be in place. The numbers support the view of many at the Fed that the end of the liquidity surge is nowhere in sight,” Mr. Naroff said.

Article source: http://www.nytimes.com/2013/04/19/business/economy/unemployment-data-signals-a-softening-economy.html?partner=rss&emc=rss