US durable goods orders fall, job market healing

Orders for long-lasting US manufactured goods fell in February as companies scaled back investment plans for a second month in a row, suggesting a cooling off in business spending. Other data on Thursday showed the labour market's recovery was becoming well-established, with new claims for jobless benefits falling last week and the four-week moving average dropping to it lowest level in more than 2-1/2 years.
Economists said while the weak manufacturing report posed a risk to their first-quarter growth forecasts, they cautioned against placing too much weight on it, noting the data was in stark contrast with other upbeat surveys on factory activity.
"Industrial production of business equipment continues to rise and the industrial surveys continue to look great, including for surveys of (capital) spending plans," wrote economists at Goldman Sachs in New York, who noted the data series was particularly volatile.
Non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 1.3 percent in February after a 6.0 percent drop the prior month, the Commerce Department said.
Economists had expected the business spending gauge to rise 4.5 percent last month. The weakness in business demand and a big drop in defence aircraft orders helped pull down overall orders for so-called durable goods, items meant to last three years or more, by 0.9 percent. They had risen 3.6 percent in January.
A second report from the Labour Department showed initial claims for state unemployment benefits slipped 5,000 to a seasonally adjusted 382,000, a touch below economists' expectations for a fall to 383,000.
The four-week moving average of new claims - a better measure of underlying trends - dropped 1,500 to 385,250, the lowest since mid-July 2008. It was the fourth straight week the closely watched average held below the 400,000 level that economists associate with steady job growth. Until recently the economy's job production had been dismal, but in February employers hired 192,000 new workers, the most in nine months.
The Federal Reserve has acknowledged the labour market is improving but appears ready to complete its planned purchase of $600 billion in government bonds to help ensure recovery. "We are still in a range that suggests job growth of around 200,000 per month, not quite yet to the level you need to be able to get 250,000 to 300,000 which is where the Fed wants to be on job growth," said John Canally, an economist at LPL Financial in Boston.
Some economists cautioned that the devastating earthquake and tsunami in Japan, and rising gasoline prices could dent business confidence and cause companies to delay hiring.
Stocks on Wall Street rose to session highs as technology shares rallied, while prices for US government debt fell. The Labour Department said the number of people still receiving jobless benefits under regular state programs after an initial week of aid fell 2,000 to 3.72 million in the week ended March 12, the lowest level since September 2008.
This data covered the week for the household survey from which the US unemployment rate is derived. The jobless rate dipped to 8.9 percent in February from 9.0 percent in January and has dropped 0.9 percentage point in the past three months.