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Weakness in job market, factories

May is off to poor start as manufacturing lags and jobless rolls swell.

May 16, 2008|From Times Wire Services

NEW YORK — The U.S. factory sector started the month on a weak note after declining in April, according to data released Thursday, while the number of workers stuck on jobless rolls hit a four-year high.

The data paint a weak picture of the U.S. economy but also send mixed signals on inflation, leaving the Federal Reserve in a dilemma as it seeks to support the economy yet keep price pressures in check.

Factory activity in the U.S. mid-Atlantic region shrank for a sixth straight month in May and manufacturing in New York state also declined this month, according to reports by regional Federal Reserve banks.

This poor start to May comes after nationwide industrial production tumbled a bigger-than-expected 0.7% in April because of a contraction in the manufacturing sector that was the most severe in nearly three years, the Federal Reserve said.

Manufacturing output dropped 0.8%, with half of that weakness coming from large cutbacks in auto production with automakers struggling amid a slump in demand, a poor economy and a strike at a General Motors parts supplier.

"The decline in April industrial production and reduction in manufacturing production is conclusive evidence that the industrial side of the U.S. economy is in a recession," said Daniel J. Meckstroth, chief economist for Manufacturers Alliance/MAPI.

The Philadelphia Federal Reserve Bank said its business activity index was at minus 15.6 this month, improving from minus 24.9 in April.

On the labor market front, a government report showed that the number of people who remained on the jobless benefit rolls after drawing an initial week of aid increased 28,000 to 3.06 million in the week that ended May 3.

It was the third consecutive week that continued claims were above 3 million and also the highest since March 2004.

The number of Americans filing benefit applications for the first time increased to 371,000, in line with estimates, from 365,000 the week before. The four-week moving average for initial claims, a less volatile measure, dropped by 1,000 to 365,750.

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