U.S. factories, labor market give conflicting signals

Attendees at a job fair line up for an interview carrying their resumes in leather bags in a Washington hotel, August 6, 2009.

The pace of growth at U.S. factories slowed in September while new jobless claims pointed to a tightening labor market, giving mixed messages on the economy's health that could complicate the Federal Reserve's plans to raise interest rates.The Institute for Supply Management (ISM) said on Thursday its index of national factory activity fell to 50.2, its lowest since May 2013 and just below the median forecast in a Reuters poll.
While any reading above 50 indicates expansion in manufacturing, growth has slowed sharply over the last year as a strong dollar has crimped exports.


More recently, a slowdown in China has sent a chill throughout the global economy, and the Fed cited concerns about global growth and financial market volatility last month when it held off on hiking rates, surprising much of Wall Street.
The ISM's index for exports held steady at 46.5, marking a contraction in activity for the fourth straight month.
The dollar fell to session lows against the euro and the yen after the manufacturing data was published, while yields on Treasury debt also declined. Wall Street stocks were trading lower.
Separately, the Labor Department said the number of new applications for U.S. jobless benefits rose modestly last week, although they remained near 15-year lows and a gauge of the trend in claims fell.
Initial claims for state unemployment benefits rose 10,000 to a seasonally adjusted 277,000 for the week ended Sept. 26.
"Filings at this level are incredibly low by historical standards, speaking to how tight labor markets are getting," said Stephen Stanley, an economist at Amherst Pierpont Securities.
Taken together, Thursday's data points to a split in the U.S. economy that is causing headaches at the Fed, where policymakers want to be sure overall economic growth will be strong enough to warrant hiking rates.
The domestic economy and the labor market appear on solid footing, which has boosted expectations the Fed could hike rates this year or in early 2016.
But a slowdown in global economic growth, coupled with whipsawing financial markets, has struck a nerve at the Fed, where there are concerns this could crimp growth and keep U.S. inflation dangerously low.