WASHINGTON (Reuters) - New claims for jobless benefits last week held at levels suggesting sluggish growth in hiring and factory activity in the mid-Atlantic region contracted in May, worrisome signs for a still-fragile economic recovery.
Initial claims for state unemployment benefits held at 370,000, the Labor Department said on Thursday. That was a little higher than analysts forecasted in a Reuters poll.
“We are really not showing much momentum in the labor market at this time,” said Sean Incremona, an economist at 4Cast in New York.
The Philadelphia Federal Reserve Bank said its business activity index dropped to minus 5.8 from positive 8.5 in April, falling well short of economists’ expectations for an acceleration of activity.
Any reading below zero indicates contraction in the region’s manufacturing. The survey covers factories in eastern Pennsylvania, southern New Jersey and Delaware.
U.S. stock prices extended losses following the Philadelphia Fed’s report, which added to concerns about the global economy as Europe’s debt crisis threatens to worsen.
The claims data comes on the heels of three straight months of slowing employment gains. Companies added 115,000 new jobs to their payrolls in April, the fewest in six months.
Thursday’s claims report covered the week for May’s payrolls survey. The four-week average of new applications, a measure of labor market trends, fell marginally between the April and May survey periods, suggesting not much change in labor market conditions.
“The claims data suggest some pickup in payroll growth but only modestly from April,” said Michael Gapen, an economist at Barclays Capital in New York.
The U.S. Federal Reserve appears disinclined to ramp up its support for the economy anytime soon unless the recovery stumbles. Minutes from the Fed’s April meeting released on Wednesday supported that view.
A separate report on Thursday from the private Conference Board showed a gauge of future U.S. economic activity fell in April for the first time in seven months.
But other recent economic indicators have been more upbeat. Data on Wednesday showed groundbreaking for U.S. homes rebounded in April and factory activity gained momentum.
Wal-Mart Stores Inc posted a better-than-expected quarterly profit on Thursday as more people shopped at its established U.S. discount stores and spent more money.
A report by RealtyTrac showed foreclosure activity on U.S. homes dropped in April to the lowest level in nearly five years.
Still, Europe’s debt crisis and the possibility that the tax burden of U.S. households could increase next year pose substantial risks for the economy.
U.S. Treasury Secretary Timothy Geithner acknowledged these risks before a group of business leaders in Baltimore, Maryland, also warning about higher oil prices.
“We still live in a dangerous and uncertain world, with Europe confronting a severe and protracted crisis,” he said.
The number of people on extended unemployment benefits slipped 45,824 to 304,755. Most states that were eligible for the extended benefits program following the 2007-09 recession lost that eligibility this year as their labor markets improved or stabilized.
That could artificially push down the unemployment rate if people dropping off the benefits rolls give up the hunt for work.
A drop in the share of working-age Americans either with a job or looking for one to near a 30-year low pushed the jobless rate down to 8.1 percent last month from 8.2 percent in March.
Additional reporting by Rachelle Younglai in Baltimore, Chris Reese and Leah Schnurr in New York and Jessica Wohl in Chicago; Editing by Andrea Ricci