Manufacturing in the US Mid-Atlantic region expanded in August for the first time in 10 months but new claims for jobless benefits rose unexpectedly last week, underscoring the uneven nature of the nation's economic recovery. The Philadelphia Federal Reserve Bank said on Thursday its business activity index rebounded to 4.2 in August from minus 7.5 in July, exceeding even the most optimistic forecasts and reaching its highest point since November 2007.
-- Mortgage delinquency rates climb
Any reading above zero indicates expansion in the region's manufacturing sector. The Philadelphia Fed index was the latest report to show the factory sector improving as manufacturers rebuilt depleted inventories. But a separate report from the Labour Department underscored the still-frail state of the jobs market.
Initial applications for state unemployment insurance benefits rose 15,000 to a seasonally adjusted 576,000 last week, tempering some of the optimism and pointed to an anemic recovery pace. "The data we've seen is indicative of a modest recovery that's beginning to occur. We think the economy will see positive growth over the ensuing quarters, but we're expecting it to be a modest recovery," said Craig Hester, chief executive officer of Hester Capital Management in Austin, Texas.
The Philadelphia Fed's survey showed new orders rose to 4.2 from minus 2.2 in July, also the highest since November 2007. The employment index rose to minus 12.9 from minus 25.3 last month. Separately, the index of leading economic indicators, which is supposed to forecast economic trends six to nine months ahead, rose for a fourth straight month in July.
While economic data continue to point to a pending upturn from the recession that started in December 2007, doubts over the sustainability of the recovery are causing companies to be cautious. Though the pace of layoffs has slowed markedly from early this year, unemployment remains high and continues to inflict big dents in household incomes. There are fears that consumer spending will be too tepid to drive the recovery.
The Labour Department said the number of people collecting long-term unemployment benefits edged up 2,000 to 6.24 million in the week ended August 8. However, the four-week moving average declined 2,500 to 6.27 million. The insured unemployment rate, which measures the percentage of the insured labour force who are jobless, was unchanged at 4.7 percent.
"The report is indicative that this is definitely not going to be a V-shape recovery. For a real recovery we need the consumer to be in the game but with rising unemployment the consumer is not going to be out there spending," said Kurt Karl, chief US economist at Swiss Re in New York. Dwindling incomes as unemployment continue to rise are forcing many homeowners to default on their home loans.
The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.24 percent of all loans outstanding as of the end of the second quarter of 2009, the Mortgage Bankers Association said on Thursday.