Factory slump deepens, jobless rolls up

Construction workers put up second story framing as they build homes in Carlsbad, California November 17, 2005. (REUTERS/Mike Blake)

NEW YORK (Reuters) - Mid-Atlantic factory activity in April fell into its worst slump since the 2001 recession while jobless benefit rolls swelled to their highest in almost four years early this month, data showed on Thursday.

The reports offered further signs the economy remains weak, even after aggressive Federal Reserve interest rate cuts.

The Philadelphia Federal Reserve Bank said its business activity index shrank to minus 24.9, much worse than expected and the lowest since February 2001, from minus 17.4 in March. The last U.S. recession lasted from March to November 2001.

The survey followed government data showing the number of workers remaining on jobless benefits rose to 2.98 million in the week ended April 5, the most recent data available and the highest since June 2004.

"All these economic numbers are just falling off the charts. I'm worried that we are going to see negative growth for some time," said Thomas di Galoma, head of U.S. Treasury trading at Jefferies & Co in New York.

On Wall Street, stocks inched lower after the data and the dollar pared gains. Government bond prices, which usually benefit from weak economic data, were lower.

UNPREPARED FOR THE WORST

Analysts had been prepared for another contraction in the Philly Fed index, but had expected it to show the rate of decline had lessened in severity.

Economists polled by Reuters had forecast a reading of negative 15.0. Any reading below zero indicates contraction in the region's manufacturing sector. The index tracks manufacturing in eastern Pennsylvania, southern New Jersey and Delaware.

The 58 estimates in the Reuters poll ranged from minus 25.0 to negative 5.0.

In a bad sign for the future, the Philadelphia Fed's index of new orders fell to its lowest since February 2001, while its employment index had its worst showing since May 2003.

If there was any good news in the Philly Fed data, it was on inflation, showing a slight moderation that could temper concerns that the economy is headed for a "stagflationary" period of slow growth and high inflation.

On the employment front, new claims for jobless benefits climbed by 17,000 to 372,000 in the week ended April 12, the Labor Department said, slightly less than analysts' forecasts of 375,000 in a Reuters poll.

The four-week average of new claims, considered a more reliable guide to underlying labor market trends because it smoothes out weekly fluctuations, moderated slightly to 376,000 from a revised 376,750 in the previous week.

The day's data was not uniformly grim, however, but the search for a silver lining was still a challenge.

A key economic forecasting gauge inched up in March, after dropping five months in a row, but the future may still be dim for recovery, the private Conference Board said.

The board's Leading Economic Indicators index rose 0.1 percent in March, exceeding analysts' expectations that it would remain unchanged after a 0.3 percent decline in February.

"While latest data do not support the assertion that we're in a recession, growth remains weak, a situation that may continue into the third and fourth quarters," said Ken Goldstein, the Conference Board's labor economist, in a statement. "There's been no job growth over the past three months, and overall profits have declined."

(Additional Reporting by Richard Leong; Editing by Dan Grebler)

• Searched
• E-Mailed