U.S. manufacturing closed out its weakest quarter in three years this month and the number of Americans filing new claims for jobless benefits held near two-month highs last week, suggesting the economic recovery is failing to gain traction.
Financial information firm Markit said its U.S. “flash”, or preliminary, manufacturing Purchasing Managers Index stood at 51.5 in September, unchanged from August. A reading above 50 indicates expansion.
The index averaged 51.5 in the third quarter, below the 54.2 registered between April and June, for its worst showing since the third quarter of 2009. At 51.2, the output component was the lowest since September 2009.
“With output growing at the slowest pace since the recovery began, the manufacturing sector may have even acted as a slight drag on the economy in the third quarter,” Markit chief economist Chris Williamson said.
After growing at a 1.7 per cent annual pace between April and June, the economy likely slipped “closer towards stagnation” between July and September, he added.
A separate report from the U.S. labour Department showed initial claims for state unemployment aid edged down just 3,000 to a seasonally adjusted 382,000 last week Economists had attributed a spike in claims in the prior week to Tropical Storm Isaac, but the minimal improvement in the latest reading pointed to fundamental weakness.
The four-week moving average for new claims, a better measure of labour market trends, rose 2,000 to 377,750 – the highest level since June. It was the fifth consecutive weekly increase in the measure.
Still, Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis, said the claims did not signal an economy “in trouble.”
“It’s more the case that we are still in a period of slow growth,” he said.
The report on jobless claims covered the period for the government’s September nonfarm payrolls survey. Claims have risen 8,000 between the August and September survey periods, suggesting modest job growth this month.
However, Markit’s survey of purchasing managers showed hiring in the factory sector strengthened a bit, with the employment sub-index edging up to 52.7 from 52.4.
U.S. employers added only 96,000 jobs last month, a step down from July’s 141,000 count. While the unemployment rate dropped to 8.1 per cent in August from 8.3 per cent, it was because many Americans gave up the search for work.
Lackluster labour market conditions prompted the Federal Reserve last week to launch an aggressive stimulus program. It vowed to buy $40-billion (U.S.) worth of mortgage-backed securities each month until it sees a sustained upturn on the jobs front.
Boston Federal Reserve Bank President Eric Rosengren, one of the more vocal “doves” at the central bank, said the new stimulus program was need to “avoid a prolonged economic stagnation.”
The unemployment rate has been stuck above 8 per cent for more than three years, the first time this has happened since the Great Depression.
The number of people still receiving jobless benefits under regular state programs after an initial week of aid fell 32,000 to 3.27 million in the week ended Sept. 8, the claims report showed. That was the lowest level since mid-May and most likely reflected people exhausting their benefits.