Reports show an economy that is growing, but slowly

WASHINGTON -- Four economic reports painted a picture of a slowly growing economy Thursday. They said:

• Growth at service firms was slow but steady in October and hiring increased.

• Companies increased orders to factories slightly in September while boosting demand in a key category that tracks business investment plans by the largest amount in six months.

• Fewer people applied for unemployment benefits last week, a hopeful sign that the job market might be picking up.

• Workers increased their productivity this summer by the largest amount in a year and half, and they cost their employers less.

In the first report, the Institute for Supply Management said Thursday that its service sector index dipped slightly to 52.9, from 53 in September. But any reading over 50 indicates expansion. The index covers retailers, financial services firms, hotels and all other non-manufacturing industries that employ 90% of workers.

The overall ISM index is just above a 17-month low reached in July. It set a five-year high of 59.7 in February.

Firms said that growth in new orders decreased and that there were fewer orders in the pipeline, signs that service sector could weaken in the months ahead.

But the survey showed firms added jobs in October after cutting them in September. An index measuring employment rose to 53.3, after falling below 50 the previous month.

"This is yet more evidence that recession risks have faded, but that the outlook for growth remains weak," said Paul Dales, senior U.S. economist at Capital Economics, in a note to clients.

In the second report, the Commerce Department said total factory orders increased for a third month, edging up 0.3%. Demand for core capital goods, the category that serves as a proxy for business investment spending, jumped 2.5%, largest increase since a 5.4% rise in March.

The surge in demand for capital goods reflected significant increases in demand for heavy machinery and computers. These gains were seen as a positive sign for the weak economy, showing that businesses are sticking with plans to expand and modernize.

In the unemployment claims report, the Labor Department said weekly applications for unemployment benefits dropped 9,000 to a seasonally adjusted 397,000, lowest level in five weeks. It's only the third time since April that applications have fallen below 400,000.

The four-week average, a less volatile measure, fell to 404,500, fifth drop in the past six weeks. The declines indicate companies are laying off fewer workers.

The figures come a day before the government issues the October jobs report. Economists expect that will show a net gain of 100,000 jobs, with the unemployment rate remaining 9.1%.

Weekly unemployment claims need to fall below 375,000 to signal sustained job gains. They haven't been at that level since February.

In the productivity report, the Labor Department said productivity rose at an annual rate of 3.1% in the July-September quarter after two straight quarterly declines. Labor costs dropped at an annual rate of 2.4% in the quarter, first decline since late 2010.

Productivity is the amount of output per hour of work. The big jump in productivity in the third quarter reflects the fact that economy had its best quarterly growth in a year while hours worked were little changed.