WASHINGTON – A raft of economic news Thursday sketched a picture of a weakening U.S. economy held back by sluggish home buying and factory production.
Americans bought fewer homes in June than in May. Manufacturing in the Federal Reserve’s Philadelphia region contracted for a third straight month this month. And a gauge of future U.S. economic activity fell in June.
The number of Americans seeking unemployment benefits rose 34,000 last week. Normally, that would signal an increase in layoffs. But the figure was skewed higher by seasonal factors that made it hard to tell whether the job market might be worsening.
The government tries to adjust its unemployment benefits data to reflect temporary summertime layoffs in the auto industry. But this year, many automakers skipped those shutdowns to keep up with demand. That led to fewer layoffs, which the Labor Department didn’t anticipate.
Once those statistical distortions fade, Joshua Shapiro, chief U.S. economist at MFR Inc., wrote in a note to clients, “we suspect that the data will point to a soggy labour market.”
The economy is struggling to generate enough growth to boost hiring and consumer spending from subpar levels.
Job growth slowed to 75,000 a month from April through June, down from healthy 226,000 pace in the first three months of the year. Unemployment is stuck at 8.2 per cent.
On Wednesday, a survey by the Fed said hiring was “tepid” in most of its districts in June and early July. And manufacturing weakened in most regions.
Retail sales fell in June for the third straight month, the government said this week. That led many economists to downgrade their estimates for growth in the April-June quarter. Many think it will be even slower than the first quarter’s scant 1.9 per cent annual pace.
The few pieces of good economic news lately have been confined mainly to housing. On Wednesday, for example, the government said builders broke ground last month on the most homes in nearly four years. Single-family home building rose for a fourth straight month. And permits to build single-family homes hit their highest point since March 2010.
Builder confidence has also risen. And average rates on fixed mortgages fell this week to record lows, mortgage buyer Freddie Mac said Thursday. The average on the 30-year loan fell to 3.53 per cent, the lowest since long-term mortgages began in the 1950s.
But the National Association of Realtors said Thursday that sales of previously occupied homes fell 5.4 per cent from May to June to a seasonally adjusted annual rate of 4.37 million homes. That was the fewest since October.
Compared with a year ago, sales are up 4.5 per cent. But the annual sales pace is well below the 6 million that economists consider healthy.
“It is only one month, and the rest of the housing indicators have all continued to show improvement,” said Jennifer Lee, senior economist at BMO Capital Markets. “Let’s hope this June decline is a blip.”
Measures of the overall economy, though, suggest the recovery may be in danger of stalling. The Conference Board’s index of leading economic indicators slipped in June. The index fell 0.3 per cent after a 0.4 per cent increase in May. It had dropped 0.1 per cent in April, its first decline in seven months.
Six of the 10 components of the board’s index fell last month. The biggest driver was an index of new orders.
Average consumer expectations also declined. So did building permits, stock prices and orders for long-lasting factory goods excluding defence and aircraft — a measure of business investment. And average applications for unemployment benefits rose.
“The U.S. economy is growing very slowly,” said Ken Goldstein, an economist with the Conference Board.
The leading indicators index “is pointing to no strengthening over the next few months, as the economy continues to sail through strong headwinds domestically and internationally,” he said.