U.S. Economy Shows Signs of Life, but Some Mixed Data Too

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People fill out application forms before a screening session for seasonal jobs at Coney Island in the Brooklyn borough of New York March 4, 2014. Shannon Stapleton/Reuters

WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting the labor market continued to strengthen.

Other data on Thursday showed factory activity in the mid-Atlantic region braked sharply in December, but that followed hefty gains in the prior month and analysts said manufacturing remained on solid ground.

"The economy continues to run hard as it finishes out the year," said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

Initial claims for state unemployment benefits dropped by 6,000 to a seasonally adjusted 289,000 for the week ended Dec. 13, the Labor Department said. Wall Street had expected claims to rise to 295,000.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, slipped by 750 to 298,750.

The data came a day after the Federal Reserve offered an upbeat assessment of the labor market and the broader economy, and signaled it could start raising interest rates next year.

The U.S. central bank, which has kept its short-term interest rate near zero since December 2008, lowered its unemployment rate forecast on Wednesday. Many economists expect the first rate hike in mid-2015.

In a second report, the Philadelphia Federal Reserve Bank said its business activity index fell to 24.5 this month from a reading of 40.8 in November. Any reading above zero indicates expansion in the region's manufacturing sector.

Economists said November's jump in the index had grossly exaggerated the strength of manufacturing. They said this month's sharp deceleration brought it in line with other factory indicators.

"We suspect that the slump was also mostly noise rather than any signal that, in this case, the global slowdown is suddenly undermining U.S. manufacturing," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.U.S. stocks were trading higher on the data and also were supported by signs that oil prices were stabilizing. Prices for U.S. Treasury debt fell, while the dollar rose against a basket of currencies.

Last week's data covered the period during which the government surveyed employers for December's nonfarm payrolls.

The four-week average of claims rose between the November and December survey periods, suggesting a step back in job growth after payrolls surged by 321,000 last month. The December payrolls are still expected to come in above 200,000.

Job gains have exceeded 200,000 for 10 straight months, the longest such stretch since 1994.

In another report, financial data firm Markit said its "flash" services Purchasing Managers Index fell to 53.6 in December, the lowest reading since February, from 56.2 in November. A reading above 50 signals expansion in the services sector.

The survey, however, is not regarded as a reliable indicator of services sector activity because of its short history.