* Factory growth slowest in 11 months
* Weekly jobless claims fall only 2,000
* Mid-Atlantic factory gauge plunges to 10-month low
* Home resales fall 1.5 percent in May
By Lucia Mutikani and Steven C. Johnson
WASHINGTON/NEW YORK, June 21 U.S manufacturing
grew at its slowest pace in 11 months in June and the number of
Americans filing new applications for unemployment aid fell only
slightly last week, further evidence the economy was weakening.
Other reports on Thursday underscored the difficulty the
economy was having breaking out of a soft patch. Factory
activity in the Mid-Atlantic region tumbled to a 10-month low in
June and home resales slipped in May.
"Today's numbers are ugly. The economy is in another
mid-year slump, growth will struggle to breach 2 percent and the
odds are rising that the Fed will need to do more, probably as
soon as its August meeting," said Ryan Sweet, a senior economist
at Moody's Analytics in West Chester Pennsylvania.
The Federal Reserve on Wednesday moved to hold down
borrowing costs by extending a program to re-weight securities
it holds toward longer maturities. However, many economists
think it will eventually launch a third round of bond purchases
in a more aggressive bid to spur a stronger recovery.
The economy is going through a repeat of 2011 when growth
stumbled in summer, with Europe's debt crisis and uncertainty
over the course of U.S. fiscal policy making businesses
reluctant to hire.
Financial information firm Markit said its U.S. "flash"
manufacturing gauge fell to 52.9 in June from 54.0 in May.
June's reading was the lowest since last July although it stayed
above 50, indicating an expansion in activity.
For the second straight month, weaker demand from Europe and
large emerging markets such as China dented sales. Markit said
U.S. manufacturers reported the second largest decline in new
export orders since September 2009.
JOB MARKET STAGNATING
In a separate report, the Labor Department said initial
claims for state unemployment benefits slipped 2,000 last week
to a seasonally adjusted 387,000. However, a four-week moving
average, considered a better measure of labor market trends, hit
the highest level since early December.
The claims data covered the survey week for the government's
nonfarm payrolls count for June and pointed to only a marginal
improvement on the paltry 69,000 jobs added in May.
"The labor market is appearing to be losing further
momentum, with the economy likely to add jobs at a very modest
pace in June, possibly within the 100,000 to 150,000 range,"
said Millan Mulraine, senior macro strategist at TD Securities
in New York.
"This is likely to be well below the pace at which the Fed
will feel sufficiently confident that the current economic
recovery could be sustained."
The Labor Department will release its June employment report
on July 6. Much of the recent weakness in the labor market has
been due to a decline in hiring rather than a pick up in
In a third report, the Philadelphia Federal Reserve Bank
reported that factory activity in eastern Pennsylvania, southern
New Jersey and Delaware contracted for a second month in June.
The dour reports handed stocks on Wall Street their worst
day in three weeks. Prices for U.S. government bonds rose as
investors sought a safe haven for their money, while the dollar
notched its biggest one day gain in more than three months
against a basket of currencies.
Manufacturing has been one of the strongest links in an
otherwise frail U.S. economic recovery, but weaker overseas
demand may be starting to take its toll.
Both the Markit index and the Philadelphia Fed survey showed
weakness in employment measures.
"The close fit of the survey data with non-farm payroll
numbers suggests that the official (employment) data for June
will show a further weakening of the labor market," said Markit
chief economist Chris Williamson.
Labor market weakness was key in the Fed's decision on
Wednesday to extend its so-called Operation Twist program
through the end of the year. It was due to expire this month.
In a relative bright spot, a gauge of future U.S. economic
activity rebounded in May.
While sales of previously owned homes fell 1.5 percent last
month, the drop followed April's hefty 3.4 percent increase and
the median home price in May rose for a fourth straight month.