US manufacturing growth slows, labour market struggling
WASHINGTON, June 21 – US manufacturing grew in June at its slowest pace in 11 months and hiring in the sector slowed as overseas demand for US products waned, an industry survey showed today.
The number of Americans filing new claims for unemployment benefits was also little changed last week, according to the US Labor Department.
Financial information firm Markit said its US “flash” manufacturing Purchasing Managers Index fell to 52.9 from 54.0 in May. The June reading was the lowest since last July although it stayed above 50, indicating expansion in activity.
For the second straight month, weaker demand from Europe and large emerging markets such as China dented sales. Markit said US manufacturers reported the second largest decline in new export orders since September 2009.
The index’s new orders component fell to 54.1 from 54.6.
Manufacturing has been one of the strongest links in an otherwise frail US economic recovery, but Markit said weaker overseas demand may be starting to slow hiring in the sector.
The employment component fell in June to 53.1, reflecting the weakest rate of hiring in eight months. It stood at 54.3 at the end of May.
“The impact of weak sales on employment is a key concern,” said Markit chief economist Chris Williamson. “The close fit of the survey data with non-farm payroll number suggests that the official (employment) data for June will show a further weakening of the labour market.”
Job growth in the United States slowed sharply for a third consecutive month in May and the unemployment rate rose for the first time in nearly a year.
The “flash,” or preliminary reading, is based on replies from about 85 per cent of the US manufacturers surveyed. Markit’s final reading will be released on the first business day of the following month.
The Institute for Supply Management, which publishes a separate monthly manufacturing survey, releases its June index on July 2. ISM’s May index showed slower growth in the sector despite a sharp rise in new orders.
JOBLESS CLAIMS SHOW US LABOR MARKET STRUGGLING
In other data today, the number of Americans filing new claims for unemployment benefits was little changed last week, according to government data today that suggested the labour market was struggling to regain momentum.
Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 387,000, the Labor Department said. The prior week’s figure was revised up to 389,000 from the previously reported 386,000.
Economists polled had forecast claims falling to 380,000 last week. The four-week moving average for new claims, considered a better measure of labour market trends, increased 3,500 to 386,250 – the highest level since early December.
The claims data covered the survey week for June’s nonfarm payrolls and the report pointed to little or no improvement on the paltry 69,000 jobs added in May. Claims rose 15,000 between the May and June survey periods.
“This confirms the weak labour market we have. I suspect we would see a modest rebound in payrolls in June but it would still be below 150,000. It’s going to be another month of sub-par jobs data,” said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
US stock index futures were little changed on the data, while Treasury debt prices slightly trimmed earlier gains. The euro pared losses versus the dollar.
Labour market weakness prompted the Federal Reserve yesterday to ease monetary policy further by extending a programme to re-weight bonds it already holds toward longer maturities to hold down borrowing costs.
The so-called Operation Twist, which was due to expire this month and will now run through the end of the year, was expanded by US$267 billion (RM849.19 billion).
Fed Chairman Ben Bernanke said the US central bank had considerable scope to take further action and that a lack of sustained progress in the labour market would require it.
Much of the recent weakness in the labour market has been due to a decline in hiring, rather than increased layoffs.
Data on Tuesday showed job openings dropped to a five-month low in April, spread across all sectors of the economy. There are no jobs for more than two out of every three unemployed Americans.
New applications for unemployment benefits have barely budged since April. A Labour Department official said there was nothing unusual in the state-level data and only claims for New Jersey had been estimated.
The number of people still receiving benefits under regular state programmes after an initial week of aid was unchanged at 3.30 million in the week ended June 9.
The number of people on extended benefits fell 24,638 to 110,864 in the week ended June 2, the latest week for which data is available, as more states lost eligibility for extended benefits for the long-term unemployed.
Only six states and the District of Columbia were offering extended benefits during that period.
Economists expect that as more people fall off the unemployment benefit rolls, that will push down the jobless rate as they are forced to take up jobs they would not normally have considered or drop out of the labour force.
A total of 5.83 million people were claiming unemployment benefits during the week ending June 2 under all programmes, down 1,164 from the previous week. – Reuters
