Magazine article American Banker

Jobless Rise Seen Suggesting More Dramatic Slowdown in Growth Than Had Been Expected

Magazine article American Banker

Jobless Rise Seen Suggesting More Dramatic Slowdown in Growth Than Had Been Expected

Article excerpt

Some on Wall Street are suddenly beginning to wonder how far the slowdown in the economy will go.

The issue took on new emphasis after weekly unemployment claims for early December were revised sharply upward and the four-week moving average of claims rose to 343,000, a five-month high.

"Labor market activity is clearly slowing," said Bruce Steinberg, manager of macroeconomic research at Merrill Lynch & Co.

Views of the economy underwent a rapid transformation last week. Reports of stronger-than-expected industrial production and housing starts were quickly superseded by more moderate indicators.

In fact, the latest economic data "all signal slower growth than consensus expectations," said Gary L. Ciminero, an economist based in Providence, R.I.

The rise in joblessness claims is important because much of it happened during the week the Bureau of Labor Statistics collects information for its monthly labor market report, next due in early January.

"We're now looking at a weaker labor picture than just a couple of weeks ago," Marilyn Schaja, money market economist at Donaldson, Lufkin & Jenrette Securities Corp., told Dow Jones News Service.

There was more than just employment data, however. Mortgage applications fell after mortgage interest rates rose earlier this month. At the same time, the Federal Reserve Bank of Philadelphia reported unexpected weakness in manufacturers' expectations shown in its December business sentiment survey.

Regional Fed surveys can sometimes be unpredictable and the Philadelphia index has been prone to large swings this year, but in this instance, several economists said, it appeared to confirm other trends. …

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