- The Washington Times - Friday, August 3, 2001

ASSOCIATED PRESS

Manufacturers, hardest hit by the economic slowdown, saw orders fall in June. But in a sign that the rash of layoffs may be moderating a bit, new claims for unemployment insurance fell to the lowest level since mid-February.
The government reports, released yesterday, continue to depict a struggling economy, which has been stuck in low gear for a year.
Orders to U.S. factories declined by a bigger-than-expected 2.4 percent in June, erasing the 2.2 percent gain registered in May, the Commerce Department said. Demand fell for military airplanes, cars, computers and industrial machinery. It marked the second decrease in the past three months.
"Manufacturing is in big trouble," said economist Clifford Waldman of Waldman Associates.
To cope with sagging demand, manufacturers have sharply cut production and capital investment and laid off thousands of workers.
But on a more upbeat note, the number of U.S. workers filing new claims for state unemployment insurance for the workweek ending July 28 fell by a seasonally adjusted 23,000 to 346,000, the third sharp decline in a row, the Labor Department said. The drop pulled claims down to their lowest level since Feb. 17.
Economists said some of the decline reflects automotive and textile workers who had been temporarily laid off being recalled to work. This time of year, jobless claims tend to bounce around, particularly as auto plants close temporarily to retool for new model cars.
"Even accounting for the distortions this time of year, I think the jobless numbers may be signaling that mass job layoffs are behind us," said economist Richard Yamarone of Argus Research Corp.
The more stable four-week moving average of jobless claims, which smoothes out week-to-week fluctuations, also fell last week to 395,250 the second consecutive drop.
Paul Taylor, chief economist at the National Automobile Dealers Association, viewed the decline in claims as a positive development.
"What I think we are starting to see is some improvement as many small- and medium-sized firms make hires from the qualified employees dismissed by larger firms," he said.
Even so, the nation's unemployment rate, which is considered a lagging economic indicator, is likely to keep rising in the months ahead, possibly passing 5 percent by year's end. Even if the pace of layoffs slows, the jobless rate would continue to rise unless companies step up hiring.
Many economists believe the jobless rate will rise from 4.5 percent in June to 4.7 percent in July. They also predict that businesses will eliminate 38,000 jobs, compared with the 114,000 lost in June. The government will release the July employment report today.
To avert a recession, the Federal Reserve has cut interest rates six times this year, totaling 2.75 percentage points. Many analysts believe the Fed will order another rate reduction at its next meeting Aug. 21.
In the factory-orders report, orders for transportation products, which includes cars, declined by 3.3 percent in June, after a 3.2 percent gain in May.
Excluding the transportation sector, which tends to swing widely from month to month, factory orders fell by 2.3 percent in June, the third decrease in that measure in the past four months.
For computers and electronic products, orders fell 1.3 percent, after a 1.1 percent rise in May. One of the reasons the Fed has cited for cutting interest rates has been weak investment by businesses in computers and other high-tech equipment. The economic boom was fueled in part by strong capital spending.
Orders for machinery declined by 1.2 percent in June after a 2.3 percent increase.
Manufacturers' woes continued into July. The National Association of Purchasing Management reported Wednesday that manufacturing activity contracted again in July, the 12th consecutive month of decline.

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