Jobless claims rise a bit, but labor market is firm

WASHINGTON -- The number of people signing up for jobless benefits rose last week, although the latest figures suggest employment conditions around the country remain good.

The Labor Department said Thursday that new applications for unemployment insurance rose a seasonally adjusted 4,000 to 307,000 the week ended July 28. That was better than economists expected; they were forecasting claims to rise to 310,000.

New claims also were lower than a year ago, when they stood at 315,000.

In another report, U.S. factories saw demand for their products improve in June — but not as much as some hoped. The Commerce Department said new orders rose 0.6%, compared with a 0.5% drop in May. Economists, however, were calling for a 1% gain.

Still, the overall gain registered in June did mark the best showing since March.

Demand for "durable" goods, including machinery, airplanes, turbines, generators and electrical equipment rose 1.3% in June. Orders for durable goods dropped 2.4% in May.

Demand for "non-durable" goods, including clothing and meat, poultry and seafood products, meanwhile, edged down 0.1% in June. That compared with a 1.5% increase in the previous month.

June non-defense capital goods orders excluding aircraft, viewed as a good proxy for business spending, were unchanged, which was better than a 0.7% decline seen in an estimate by the government last week.

"The best thing about the report is that the core reading, non-defense capital orders, was revised higher. This suggests a slightly upward revision, about a tenth of percentage point to second-quarter GDP," said Michelle Meyer, an economist with Lehman Bros. in New York.

Transportation equipment orders, a volatile category whose monthly performance is heavily influenced by aircraft orders, increased 7.1% in June.

Excluding transportation, factory orders declined 0.5%. This was the first outright fall since January. June's performance was hurt by a 3.6% drop in computers and electronic products and a 6.1% fall in primary metals.

A more forward-looking report released by the Institute for Supply Management showed that the manufacturing sector lost a bit of momentum in July, growing at its slowest pace in four months. The report is consistent with analysts' forecasts that the economy will grow gradually — but not like gangbusters — through the rest of this year.

In the layoffs report, the four-week moving average of new claims, which smooths out week-to-week fluctuations, fell last week by 3,500 to 305,500, lowest level since late May.

Also encouraging: The number of people continuing to collect unemployment benefits sank 16,000 to 2.5 million in the work week ended July 21, the most recent period for which this information is available.

Even as economic growth has seesawed, companies have hired at a steady pace.

The government releases July's employment report Friday, and economists predict that companies added 135,000 jobs in July, about the same as the 132,000 added in June. The unemployment rate is expected to hold steady at 4.5%, low by historical standards.

Still, there has been pain from the depressed housing market and from the financial squeeze involving higher-risk "subprime" mortgages.

The Federal Reserve meets Tuesday and is widely expected to hold its target for a key interest rate at 5.25%, extending a more than year-long breather for borrowers.

Fed Chairman Ben Bernanke and his colleagues, however, still believe inflation is a threat to the economy. One of the things they are watching closely is whether the sturdy labor market — which has allowed some workers to command higher wages and benefits — could add to inflation pressures.

High gasoline and food prices in recent months have pinched consumers and made some workers feel that increases in their paychecks haven't been large enough.