WASHINGTON – At first glance, a batch of U.S. economic data released Thursday looked dispiriting. Companies slashed orders for factory goods. The government cut its most recent growth estimate. And fewer people signed contracts to buy homes.
Yet a peek beneath the headlines, and a separate report on applications for unemployment aid, suggested that the economy is sturdier than it might appear.
Don’t panic, Paul Ashworth, chief U.S. economist at Capital Economics, said in a research note.
The data released Thursday showed that:
Companies cut orders for long-lasting goods by 13.2 percent in August. The drop reported by the Commerce Department was the steepest in more than three years, but it was caused mainly by a plunge in volatile aircraft orders. Excluding transportation equipment, orders fell just 1.6 percent. And a category that reflects business investment plans rose 1.1 percent – its first increase since May.
The economy grew at a scant 1.3 percent annual rate in the April-June quarter. That was down from the 1.7 percent rate the government had previously estimated. But the downward revision was largely because of the Midwest drought, which cut farm production.
The number of Americans who signed contracts to buy previously occupied homes fell in August from a two-year high in July. The National Association of Realtors said its index of sales agreements declined to 99.2, just below the reading of 100 that’s considered healthy. Still, the index is 10.7 percent higher than a year ago.
Investors appeared to shrug off the reports and focused instead on Spain’s plan to slash its budget to show it can meet deficit-reduction targets. The Dow Jones industrial average closed up 72 points.
While the economy looks sturdier than some feared, it’s being slowed by chronically high unemployment and stagnant wages. Those weaknesses represent risks to President Obama in his re-election race against Mitt Romney.
The Obama campaign received some ammunition Thursday: The Labor Department said hiring was stronger from April 2011 through March 2012 than expected. The economy created 386,000 more jobs in that 12-month period. That means the White House can now claim the economy has added jobs under Obama – a net gain of about 100,000.
Obama prefers to focus on job creation by private employers since they began reporting net hiring gains in February 2010. That total is now put at 5.1 million, up from a previously estimated 4.6 million.
In contrast to private employers, the public sector has been cutting jobs for the past three years. And the United States still has about 4 million fewer jobs than before the recent recession.
Still, the economy is benefiting from growing confidence, which jumped this month to its highest level since February. And steady gains in home prices, along with record-low mortgage rates, have helped fuel a modest recovery in housing.
One government report Thursday offered hope that the job market will strengthen. Weekly applications for unemployment benefits plunged 26,000 to a seasonally adjusted 359,000. That’s the lowest level in two months.