June 24, 2010

Jobless Claims Fall, Durables Rise Excluding Aircraft; Economists Still Wary About Recovery

Initial claims drop 19,000, new orders for durable goods up 0.9% ex-aircraft

Faintly upbeat news from the Labor and Commerce departments weren't enough to lift the U.S. stock market's mood on Thursday, June 24, as mixed jobs and manufacturing data left investors wondering where the economy is headed.

Initial claims for jobless benefits fell by 19,000 to 457,000 for the week ended June 19 from the previous week's revised figure of 476,000, the Labor Department said in its weekly report. Economists had expected more people to file for unemployment, in the range of 460,000 to 470,000 initial claims, but they continue to worry about lackluster job growth.

Excluding transportation, new orders for durable goods in May increased 0.9%, with gains in metals, machinery, and computers, the Commerce Department reported. But overall new orders decreased 1.1%, following five consecutive monthly increases. The decline was largely due to an expected drop-off in commercial aircraft orders.

At mid-afternoon, the Dow Jones industrial average was down 115.56 points, or 1.12%, to a reading of 10,183.

"It is hardly comforting to see the trend in claims running at 460,000 or so," said Ian Shepherdson, chief U.S. economist for High Frequency Economics Ltd., in Valhalla, New York, in an analyst note. "Had last year's downward trend continued, claims would now be well below 400,000, and we could reasonably expect to see decent sustained private payroll numbers. This hasn't happened, we think, because small businesses remain massively constrained by the contraction in credit."

As for durable goods orders, Shepherdson said the aircraft data can be very volatile, and that he expects a rebound in June. But while the underlying trend is upward, he said, it is far short of the pre-recession level.

In the core, non-defense capital goods orders ex-aircraft rose 2.1%, continuing their recovery. We expect capital spending to rise about 20% in Q2, offsetting some of the slowing in consumption. We think this is mostly replacement, rather than net new capital spending," Shepherdson said.

Read a story about April's durable goods report from the archives of InvestmentAdvisor.com.

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