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Decrease in unemployment gives hope for recovering economy

Initial jobless claims dropped by 12,000 last week,

Initial jobless claims dropped by 12,000 last week, showing that the job market was faring better. (Getty) Photo Credit: Initial jobless claims dropped by 12,000 last week, showing a better job market. (Getty)

Despite a recent slump in consumer confidence that reignited fears that the U.S. was slipping into a doubledip recession, a flood of new data on Thursday brought rays of hope, suggesting the economy isn’t as beaten down as thought.

Manufacturing unexpectedly grew in August, confounding economists who were expecting a large drop. The Institute for Supply Management’s index of national factory activity edged down to 50.6 from 50.9 in July, beating expectations that it would drop to 48.5. A reading below 50 indicates a contraction in the nation’s factory sector.

And in one of the biggest indicators that the economy is still on a slow-but-steady recovery path, initial claims for state unemployment benefits dropped 12,000 to 409,000 last week, according to the Labor Department. The decrease was a sign that layoffs haven’t picked up, but a reading above 400,000 still indicates that the labor market is unstable.

Consumers shrugged off a disappointing confidence report earlier this week as spending remained fairly sturdy. Automakers posted hefty August gains in domestic sales, and retailers saw a 4.4% increase in sales despite Hurricane Irene’s disruptionof the critical back-to-school shopping period last week.

The reports were the latest to suggest the economy remained on a slow-growth path.

“I am breathing a little sigh of relief that the bit of data that we have had over the course of August is weak, but not giving the recessionary type of signal,” said economist Stuart Hoffman.

Economists see the odds of a recession as somewhere between 20% and 30% — it had been as high as 50% last month.

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