WRAPUP 4-US data shows small gains, monetary stimulus seen

* Initial jobless claims drop 23,000 but level still high
* Leading economic index points to sluggish growth ahead
* Mid-Atlantic factory activity rebounds moderately
(Adds Fed official, updates markets to close)

By Lucia Mutikani

WASHINGTON, Oct 21 (BestGrowthStock) – A batch of new U.S. data on
Thursday painted a picture of an economy stuck in slow-growth
mode, reinforcing views the Federal Reserve will ease monetary
policy further next month to try to reinvigorate the recovery.

New claims for jobless benefits dropped last week but
remained at levels suggesting little improvement in the
distressed labor market. Other reports showed only a modest
rise in a gauge of future U.S. economic activity and a small
gain in factory activity in the country’s Mid-Atlantic region.

The data fit in with other recent signs that have shown the
economy is no longer deteriorating, although it does not appear
to be getting much better either.

“This is an economy that is showing only faint signs of
improvement at this point,” said Robert Dye, senior economist
at PNC Financial Services in Pittsburgh.

Initial claims for state unemployment benefits fell 23,000
to 452,000 last week, the Labor Department said. The drop
unwound most of a sharp jump in the previous week, but left
claims above levels associated with a solid job market
recovery.

The Fed has flagged high unemployment as one area of
concern. Economists expect officials at the U.S. central bank
to launch a second round of asset purchases in less than two
weeks to drive borrowing costs down further and stimulate
spending.

The Fed’s decision will be announced a day after the Nov. 2
congressional election, which is widely seen as a referendum on
President Barack Obama’s performance on the economy. His
Democratic party is seen facing large losses.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ U.S. jobless claims graphic: http://r.reuters.com/ket59p Reuters Insider show on jobs data supporting the dollar: [ID:nRTV155356]

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FACTORY ACTIVITY SLUGGISH

In a second report on Thursday, the Philadelphia Federal
Reserve Bank said its business activity index rose to 1.0 in
October from minus 0.7 in September.

While that indicated factory activity in the mid-Atlantic
region had perked up a little, the reading came in below
economists’ expectations for a gain to 2.0. A reading above
zero indicates expanding activity.

Separately, the Conference Board’s Leading Economic Index
rose 0.3 percent last month after a 0.1 percent gain in August.
The rise was in line with market expectations but pointed to
only subdued growth ahead.

“More than a year after the recession ended, the economy is
slow and has no forward momentum,” said Ken Goldstein, an
economist at the private research group.

The data had little impact on U.S. stocks (Read more about the stock market today. ) (.SPX: ), which
ended modestly higher on strong corporate earnings from the
likes of Caterpillar Inc (CAT.N: ), United Parcel Service Inc
(UPS.N: ) and McDonald’s Corp (MCD.N: ).

Stock investors were also heartened by growth and inflation
data from China, which suggested the world’s second-largest
economy was far from overheating and that an interest rate rise
there this week may be enough for now. See [ID:nTOE69K00X].

Prices for U.S. government debt (US10YT=RR: ) fell, while the
dollar rebounded against the euro (EUR=: ). The dollar has been
under pressure from expectations the Fed, which has already
bought about $1.7 trillion in bonds to stimulate the economy,
will ease monetary policy further.

St. Louis Fed President James Bullard said on Thursday he
would back purchases of Treasury securities in $100 billion
increments meeting-by-meeting if the U.S. central bank decided
more monetary policy easing was necessary. [ID:N21104672]

LITTLE HIRING AHEAD

Last week’s jobless claims data covered the survey period
for the government’s closely watched monthly report on
employment, due on Nov. 5, but analysts said the report had not
been lining up very closely.

“The gyrations in jobless claims have not been reliable
predictors of nonfarm payrolls in recent months,” said Julia
Coronado, an economist at BNP Paribas in New York.

“The strongest conclusion we would draw from this (claims)
report is that there do not appear to be significant changes in
either direction in labor market conditions of late.”

The jobs market has stumbled as the economy’s recovery from
the most painful recession in 70 years fizzled, leaving the
unemployment rate at an uncomfortably high 9.6 percent.

Claims for jobless aid have changed little for much of this
year but are holding below a nine-month high seen in
mid-August. The number of people still receiving benefits after
an initial week of aid fell 9,000 to 4.44 million in the week
ended Oct. 9, the lowest level since the week ending June 26.

Growth has slowed markedly as the boost from a rebuilding
of inventories by businesses has faded. Manufacturing is
cooling and the Philadelphia Fed survey, while showing current
activity up, hinted at slower growth ahead.

New orders fell for a fourth straight month in October,
while inventories fell for the third month in a row.

“There is a risk that the manufacturing sector will fall
back into recession. The main problem is that other sectors of
the economy will not be able to pick up the baton of growth,”
said Paul Dales, a U.S. economist at Capital Economics in
Toronto.
(Additional reporting by Glenn Somerville; Editing by James
Dalgleish and Jan Paschal)

WRAPUP 4-US data shows small gains, monetary stimulus seen