WASHINGTON – New signs that the recession could be nearing a bottom emerged Thursday, as factory orders were far better than expected and the Dow industrials surged over 8,000 for the first time in two months.
The Commerce Department said orders for manufactured goods rose 1.8 percent in February, reversing six straight monthly declines and easily beating estimates of another drop. Other economic indicators came in better than expected Wednesday, including construction spending and pending home sales.
Meanwhile, world leaders meeting in London on Thursday pledged $1.1 trillion to global institutions such as the International Monetary Fund to combat the downturn. And the European Central Bank agreed to cut a key interest rate to a record low of 1.25 percent.
Still, the job situation remains grim. Traditionally, the labor market doesn’t pick up until well after a recovery has started.
The monthly unemployment report due out today likely will be dismal, and new jobless claims reported Thursday were worse than expected.
The Labor Department said initial claims for unemployment insurance rose to a seasonally adjusted 669,000 from the previous week’s revised figure of 657,000. That total was above analysts’ expectations and the highest in more than 26 years, though the work force has grown by about half since then.
Financial stocks led a rally on Wall Street after the board that sets U.S. accounting standards gave banks and other companies more leeway when valuing assets and reporting losses. The Dow Jones industrial average added more than 290 points, or 3.8 percent, to 8,053 in afternoon trading, the first time it has risen above 8,000 since Feb. 10. Broader indices also surged.
Bank of America Chief Executive Ken Lewis also bolstered the financial markets when he told CNBC that the recession is “getting close to the bottom.”
Still, economists said the jobless claims figures indicate that companies continue to lay off workers at a rapid pace.
“Claims are typically one of the very first indicators to signal economic recovery, and there is no sign of that in the data yet,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a client note.
The tally of laid-off workers claiming benefits for more than a week rose 161,000 to 5.73 million, setting a record for the 10th straight week. That also was above analysts’ expectations and indicates that unemployed workers are having difficulty finding new jobs. The continuing claims data lag the initial claims by one week.
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