U.S. Economy: Factories Grow, Labor Market Struggles (Update1)
By Shobhana Chandra and Timothy R. Homan
April 15 (Bloomberg) -- Manufacturers are charging ahead as sales and inventories grow, spearheading a U.S. economic recovery that shows scant signs of lifting labor markets.
Factory production climbed 0.9 percent after rising 0.2 percent in February, the Federal Reserve said today in Washington. Regional data indicated the gains extended into this month, while figures from the Labor Department showed unemployment claims climbed unexpectedly last week to the highest level in two months.
“Manufacturing is doing pretty well,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “It is still very much in the lead. The labor market is a concern and a puzzle.”
Stocks fluctuated between gains and losses as the jump in applications for jobless benefits restrained optimism over earnings and the economy. Intel Corp. is among companies projecting sales will keep climbing as businesses invest in new equipment and the global recovery gathers momentum.
The Standard & Poor’s 500 Index rose 0.2 percent to 1,212.91 at 1:40 p.m. in New York. Treasury securities rose, pushing the yield on the benchmark 10-year note down to 3.84 percent from 3.86 percent late yesterday.
The Labor Department report showed the number of Americans filing claims for jobless benefits rose by 24,000 to 484,000 in the week ended April 10. A government spokesman said the jump had due more to with administrative factors reflecting volatility around the Easter holiday than economic reasons.
Worse Than Anticipated
Economists forecast claims would fall to 440,000 from 460,000 the prior week, according to the median of 44 projections in a Bloomberg News survey. Estimates ranged from 415,000 to 451,000.
The four-week moving average of initial claims, a less volatile measure than the weekly figures, increased to 457,750 last week, from 450,250.
“We’re not making rapid progress,” Neal Soss, chief economist at Credit Suisse Holdings USA Inc. in New York, said in an interview with Bloomberg Radio. “Job growth over the course of this year will be sufficient to bring the unemployment rate down.”
Fed Chairman Ben S. Bernanke said yesterday the labor market will be slow to recoup the jobs lost since the recession began in December 2007.
Bernanke, Unemployment
“Consumer spending should be aided by a gradual pickup in jobs and earnings, the recovery in household wealth from recent lows, and some improvement in credit availability,” he said in prepared testimony to the Joint Economic Committee of Congress. Even so, “a significant amount of time will be required to restore the 8 1/2 million jobs that were lost during the past two years.”
Reports from the New York and Philadelphia Fed Banks showed manufacturing accelerated in April. New York’s Empire State index climbed to 31.9, a ninth consecutive month of growth, from 22.9 in March. Philadelphia’s general economic index rose to 20.2 from 18.9. Readings greater than zero signal expansion.
Warmer weather last month caused utility use to drop by the most in four years, limiting the overall gain in national industrial production to 0.1 percent, less than anticipated, the Fed’s report showed.
Output was forecast to increase 0.7 percent after a previously reported 0.1 percent gain in February, according to the median estimate of 78 economists surveyed. Projections ranged from 0.3 percent to 1.2 percent.
Broad-Based Gains
Production of consumer durable goods increased 2 percent, reflecting gains in automobiles, furniture and electronics.
Output of business equipment increased 1.4 percent as demand for computers, communications equipment and semiconductors climbed, showing capital investment is improving.
Intel, the world’s biggest chipmaker, is among companies benefiting from rising demand. The Santa Clara, California-based producer this week forecast record profit margins for the year and said sales will rise this quarter after a 44 percent gain in the first three months of the year.
Consumers served as a “big driver” of computer demand and corporate executives, more confident about their outlook, are replacing aging machinery, Chief Executive Officer Paul Otellini told analysts on an April 13 conference call. “We are optimistic about the prospects of our business for 2010 and beyond.”
Builders’ outlook is also improving. The National Association of Home Builders/Wells Fargo confidence index increased to 19, a seven month high, as customers took advantage of a government tax credit before it expires, the group said today. Even with the gain, the industry is bleak as readings less than 50 mean more respondents said conditions were poor.
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