The Federal Reserve Bank of New York released its “Empire State†index on Monday, and for the first time in over a year, factory orders in the state declined. The pullback in new orders coincided with a significant reduction in manufacturing sales unequaled since March of last year. For July, the factory orders index fell to minus 2.7 on the index scale, from 10.1 in July.
News was equally grim in the housing sector where the National Association of Home Builders / Wells Fargo index measuring homebuilder confidence, fell to a 17-month low. The index uses a scale based on 50 to indicate industry confidence, where any number below 50, means that confidence has decreased from the previous period. For the current month, the index fell to 13 compared to 14 in July.
The decline in economic activity continues to place a drag on US unemployment which still hovers at 9.5 percent as of the end of July. This comes even though factories have added 183,000 new jobs to the economy since the beginning of the year, yet despite these gains, job losses still outpace new job creation. The economy’s inability to accelerate the rate of job creation is nearing a crisis point for those facing the end of their employment benefits.
To address this concern, Congress voted last month to retroactively extend benefits for those that saw their payments end in June. Still, unemployed workers who have been out of work for more than 99 weeks, will not receive further extensions and this loss of income will most certainly translate into less spending thereby further impeding recovery.
Setting aside the employment outlook, to see the optimism of industry leaders drop so dramatically in the span of a single month, casts a chill over hopes for an expanding recovery. In the past, a sharp increase in job growth led the charge as the economy fought back after a recession. Unfortunately, it is looking more and more that the new normal is a “jobless recovery†where the economy follows a recovery path that is both very shallow, and inconsistent.
