Factory orders rise, largest amount in months
WASHINGTON (AP) - January 3, 2008 The Commerce Department reported Thursday that orders for
manufactured goods rose by 1.5 percent in November, the biggest
rise since a 3.4 percent surge in July.
But all the strength came in demand for nondurable goods, which
shot up 3 percent, reflecting higher oil prices. Orders for durable
goods, everything from appliances to autos, actually fell by 0.1
percent, the fourth straight monthly decline.
Analysts said the drop in durable goods reflected the problems
facing factories right now. On Wednesday, the Institute for Supply
Management reported that its closely watched manufacturing gauge
plunged to 47.7 in December, the lowest reading since the spring of
2003 when business confidence was hurt by uncertainties surrounding
the invasion of Iraq. Any reading below 50 is a sign that
manufacturing is contracting.
Wall Street, which had plunged on Wednesday because of new
worries about a possible recession and higher oil prices, rebounded
in early trading on Thursday with analysts choosing to focus on
stronger job readings.
The Labor Department reported that number of newly laid off
workers filing applications for unemployment benefits totaled
336,000 last week, a drop of 21,000 from the previous week. While
the decline was more than double what had been expected, analysts
said the improvement was skewed by the fact that many state claims
offices were closed for part of last week for the Christmas
holidays, giving laid off workers less time to file claims.
Private businesses added a modest 40,000 jobs to their payrolls
in December, according to a separate report by payroll giant
Automatic Data Processing and forecasting firm Macroeconomic
Advisers.
Economists said this supported their view that the unemployment
rate probably ticked up from 4.7 percent in November to 4.8 percent
in December, with total payroll jobs - both private companies and
government - growing by around 70,000. The government will release
this report on Friday.
Joel Prakken, an economist at Macroeconomic Advisers, said
employment growth at this level should be enough to keep incomes
rising and consumers spending and prevent the country from dipping
into a recession.
He said he was forecasting overall economic growth of around 1.5
percent in the final three months of 2007 and the first three
months of this year. That would be far below the 4.9 percent growth
rate of last summer but still in positive territory.
"We have a pretty pronounced slowdown but no recession in our
forecast," Prakken said. He said with the help of rate cuts from
the Federal Reserve the economy should rebound to growth of around
2.5 percent to 3 percent in the second half of 2008. The Fed has
already cut a key rate three times with many economists predicting
three more rate cuts to come as the central bank seeks to bolster
consumer and business confidence which has been rattled by the
steep slump in housing and the credit crisis which erupted in
August.
The report on factory orders showed demand for non-defense
capital goods excluding aircraft, a category which is closely
watched as a signal of business investment plans, fell for a second
straight month, dropping 0.1 percent after an even bigger 3 percent
plunge October. The concern is that the plunge in housing and the
severe credit squeeze that hit in August are causing businesses to
turn much more cautious.
The total of 336,000 jobless claims was the lowest weekly figure
in three weeks. It followed a revised claims total of 357,000 last
week, which had been the highest weekly total since October 2005
when layoffs had surged in the aftermath of a series of devastating
hurricanes along the Gulf Coast.