US economy on growth path

September 20, 2019

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WASHINGTON: The number of Americans filing applications for unemployment benefits increased less than expected last week, pointing to strong labour market conditions that should continue to support an economy growing at a moderate pace.

The steady economic growth pace was also underscored by other data on Thursday showing home resales rising in August to a 17-month high. While factory activity in the mid-Atlantic region slowed in September, orders remained solid, leading manufacturers in the region to increase employment and boost hours for workers.

The reports suggested that housing and manufacturing, the two weak spots in the economy, were stabilising. The Federal Reserve cut interest rates by another 25 basis points on Wednesday, citing risks to the longest economic expansion in history from a year-long US-China trade war and slowing economic growth overseas.

Fed Chair Jerome Powell said he expected the economy, now in its 11th year of expansion, to continue to “expand at a moderate rate,” but noted trade tensions were “weighing on US investment and exports.” The US central bank cut rates in July for the first time since 2008. The Fed offered mixed signals on further monetary policy easing. Data, including retail sales, so far in the third quarter suggest the economy is growing close to the April-June quarter’s two per cent annualised rate.

Financial markets have been flagging a recession. The Atlanta Fed is estimating gross domestic product rising at a 1.9pc pace this quarter.

“Fed officials are done cutting interest rates for the rest of this year and one of the reasons for this is that the economic data continue to surprise us on the upside,” said Chris Rupkey, chief economist at MUFG in New York.

Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 208,000 for the week ended Sept 14, the government said. Economists polled by Reuters had forecast claims increasing to 213,000 in the latest week.

Layoffs remain low despite the trade tensions, which have weighed on business investment and manufacturing. But there are concerns that slowing job growth could take some shine off robust consumer spending, which is largely driving the economy.

Published in Dawn, September 20th, 2019