The government reported Thursday that the labor market remains tight, even as a closely watched report on manufacturing provided fresh evidence of a slowing U.S. economy.
The number of Americans signing up for initial jobless benefits fell to 308,000 last week from a revised 326,000 for the previous week, well below economists’ expectations of a drop to 318,000.
The four-week moving average, which irons out week-to-week volatility, fell to 315,750 from 319,000 the previous week. Although still a relatively low number by historical standards, the four-week moving average represents an easing from the extremely tight labor market of last year and earlier in the year, when it remained under 300,000 for more than seven straight months, economists said.
“If you look at the four-week moving average, that has crept higher generally over the last few months and that suggests maybe some moderation in the job market,” said Susan Hering, economist at UBS Warburg in Chicago.
Meanwhile, the Federal Reserve Bank of Philadelphia said its index of business activity in the mid-Atlantic region, which surveys Delaware, eastern Pennsylvania and southern New Jersey, slowed to 8.2 this month from 14.1 in August.
“The manufacturing sector definitely has weakened,” said Susan Nason, who manages about $1.5 billion in government bonds for Federated Investors in Pittsburgh.
The numbers underscored recent reports on manufacturing from Chicago-area purchasing managers and the National Association of Purchasing Management, showing a slowdown in the manufacturing sector.
The NAPM index in August showed a reading of 49.1, indicating a manufacturing contraction for the first time in 19 months.
Analysts said the report also reinforced the widely held view that the Federal Reserve’s six interest rate boosts since June 1999 were taking a bite out of growth, and that the likelihood of further interest rate rises this year was virtually zero.
In fact, several economists and investors have begun to turn their attention to the possibility of a rate cut.
Some speculate that a cut could come if growth in gross domestic product slows to a rate of 3 percent–an about-face from just a few years ago, when such a rate was feared to be inflationary.
