Manufacturing cools in June as recovery slows

Consumers are likely to hold back on spending until the employment picture improves.

The latest data on jobless claims looked promising on the surface, as initial claims fell by 29,000. But much of that was the result of temporary seasonal factors. A Labor Department analyst said manufacturing companies reported fewer temporary layoffs than usual this time of year. General Motors said last month that it would forgo its customary two-week summer factory closings, which it uses to retool plants for new car models.

That usually causes a spike in temporary layoffs and jobless claims in early July. Other manufacturers also reported fewer temporary layoffs than expected, the analyst added.

Last week’s drop “is very encouraging,” Jennifer Lee, an economist at BMO Capital Markets, said in a note to clients. “But it likely won’t last” because much of it was due to seasonal factors.

Claims have been stuck above 450,000 all year, after dropping steadily last year from a peak of 651,000 in March 2009. In a healthy economic recovery with rapid hiring, claims usually fall below 400,000.

Before seasonal adjustment, the number of jobless claims rose last week. But since they didn’t rise as much as they usually do this time of year, the seasonally adjusted number fell.

The seasonal-adjustment process is intended to cancel out the impact of recurring events that don’t reflect the health of the economy. These include layoffs of temporary retail employees after the winter holidays.

AP business writer Christopher S. Rugaber contributed to this report.


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