US unemployment claims fell last week, official data showed yesterday, providing an up-to-the-minute indication of the health of the world's largest economy for traders who have been swinging wildly between optimism and panic in recent days.
The figures were better thanexpected, and helped stoke the mid-morning rally by the Dow Jones Industrial Average, but economists continue to argue amongst themselves over the outlook for theremainder of the year.
The dispute has also been reflected in the discussions of the Federal Reserve's interest rate-settingcommittee earlier this week. It eventually promised to hold rates at zero for two more years, but three members voted against the statement, the biggest dissenting block on the committee for two decades.
The Fed conceded that temporary factors, such as disruption to manufacturing supply chains from the Japanese earthquake and a spike in oil prices, could not fully explain the weakness of the US economy in the first half of the year, but there is no consensus yet on whether a double-dip recession is possible.
Traders will examine retail sales figures for July and a new consumer confidence survey, both due today, for more clues. Both are important because consumer spending accounts for 70 per cent of the economy.
Yesterday's jobless claims figure, which records the number of people who claimed unemployment benefits for the first time last week, was 395,000, down from 402,000 the previous week confounding forecasts that the claimant count would rise.
"The turnaround in initial claims since late June can now be taken as an encouraging sign that the slowdown in job growth may, indeed, have been related to temporary factors such as the disruption to parts supply in the auto sector,"said Kevin Logan, chief US economist at HSBC.
"This is not to say that the growth in employment will be particularly vigorous in the months ahead. Strong growth in payroll employment is associated with initial claims closer to 350,000, a level that is still a long way off at the moment."