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Jobless Claims Rose in Week; Philly Fed Index Up in November

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A small rise in workers’ newly filed claims for unemployment in the last week, accompanied by positive news from the Philly Fed and the Conference Board, signaled Thursday that the U.S. economy continues its modest recovery.

For the week ended Nov. 13, the advance figure for seasonally adjusted initial unemployment insurance claims was 439,000, an increase of 2,000 from the previous week's revised figure of 437,000, the U.S. Labor Department reported Thursday. The four-week moving average was 443,000, a decrease of 4,000 from the previous week's revised average of 447,000. Analysts had expected 440,000 new job claims.

Taking a broad view of the U.S. jobs outlook, an analysis from the U.S. economics team at Bank of America Merrill Lynch forecast a “growth recession” that will just manage to post positive gross domestic product numbers.

“But this GDP growth will not be fast enough to reduce the unemployment rate,” the BofA-Merrill analysts predicted. “We expect roughly 100,000 monthly job growth through the middle of next year, just matching the growth in the labor force. This will leave the unemployment rate stuck close to 9.5% through next year.”

In a news-filled day that included the General Motors and LPL Financial initial public offerings as well as European debt turmoil in Ireland and Greece, stocks closed higher Thursday. The Dow Jones industrial average finished 173.35 points higher, up 1.57%, at 11,181.23. The S&P 500 was up 18.10 points, 1.54% higher, at 1,196.69. The Nasdaq index closed up 38.39 points, 1.55% higher, at 2,514.40.

More striking economic news came out of the Northeast on Thursday as the Federal Reserve Bank of Philadelphia reported a huge jump in business activity in November—the highest since December 2009. The Philly Fed business outlook survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, soared from a reading of 1.0 in October to 22.5 in November.

All of the survey's broad indicators of economic performance showed improvement from their reading in October, and firms reported an increase in employment and work hours.

“This is a huge relief, after the unexpected huge drop in the Empire State survey,” said Ian Shepherdson, chief U.S. economist for High Frequency Economics Ltd., in Valhalla, New York, in an analyst note. “The gap between the indexes is now massive, but we are inclined to take the Philly Fed more seriously. It has a much longer history and is less volatile than the Empire State and, more to the point, we can't think of any reason beyond some sort of statistical fluke, why the Empire State index should suddenly roll over.”

In other economic news, the Conference Board Leading Economic Index for the United States increased 0.5% in October to 111.3 following a 0.5% increase in September, and a 0.1% increase in August.

The 10 components of the index—including data such as manufacturing work hours, building permits and money supply—paint an overall picture of the U.S. economy. This month’s report showed that growth is headed toward a mild pickup by spring 2011.

“The LEI remains on an upward trend, suggesting the modest economic expansion will continue in the near term,” said Ataman Ozyildirim, economist at the Conference Board, in a release. “The LEI’s growth has been slowing this year, but gains in the financial components helped its pickup in October.”


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